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Which products did Morrisons reduce in its first ‘Price Crunch’ of 2017?

06-jan-17-2-12-23-pm

Morrisons fired the first salvo of 2017 in the continuing supermarket price wars with the latest iteration of its ‘Price Crunch’ campaign. In a much anticipated move despite the rhetoric around talking up its brand values, the retailer reduced prices across a range of household items including Cathedral City Cheddar, Morrisons Medium Cauliflowers and Tropicana Juices.

Morrisons Marketing and Customer Director Andy Atkinson highlighted the price cuts would “help families who are on a tighter budget and will continue to make Morrisons more competitive.”

“Many customers are feeling the pinch after Christmas so we are cutting prices, particularly on fresh food and everyday essentials,” he continued.

This is perhaps a telling sign of things to come in the grocery sector in which the Big Four – Tesco, Asda, Morrisons and Sainsbury’s – have previously been working hard over the past twelve months to stop competing on price and instead differentiate from the discounters, and each other, by better promoting their brand values.

Where did Morrisons focus its price cuts?

Brand View has identified 1,395 products that had a shelf price reduction on 3 January 2017. Morrisons focused it reductions on the Grocery category which accounted for 65 percent of the total number of price reductions. The retailer, however, focused less on grocery than it did on 30-31 August 2016, the last ‘Price Crunch’ Brand View analysed, where 91.1 percent of its price cuts were on grocery items.

The Health & Beauty category was the second most promoted department with 18.9 percent of the price cuts on 1 January 2017. Some 31.4 percent of the reductions in this category were in the Hair Colourants sub-category alone – the vast majority of these reductions were L’Oréal manufactured products.

Breaking down the Grocery department into its constituent parts shows the majority of the price cuts, 61.5 percent, were on Ambient Foods categories. This differed from the price cuts observed in August which focused on Chilled Foods divisions.

The price cuts on 3 January 2017 closely resembled those observed 11 months ago on 3 February 2016 when Morrisons first launched it’s ‘Price Crunch’ initiative. It focused its price reductions on the Grocery categories, and the Ambient Foods categories, on both 3 February 2016 and 3 January 2017.

The Hair Colourants category had the greatest number of price reductions with 83 – all but one of these were L’Oréal brands such as Garnier Nutrisse and L’Oréal Excellence.

The Hair Colourants category was also prominently featured in Morrisons’ price cuts on 3 February 2016. It had the second most price reductions of any category however these were on Schwarzkopf and Vidal Sassoon products. Both price cuts appear to be targeting women who want to start the new year with a new hair colour – #newyearnewhair.

The Cooking Sauces and Tea sub-categories had the second greatest amount of price reductions with 58 each – largely focusing on branded items. Branded products made up 85.7 percent of all the price reductions Morrisons made on 3 January 2017.

The impact of Brexit

It is interesting to note that the Tea category had the second greatest number of price reductions despite the fact that it will be significantly affected by the UK’s decision to leave the European Union (EU).

Typhoo Tea Chief Executive Somnath Saha stated in October 2016 that the cost of importing an 80kg bag of tea had increased by 50 percent and that the result of the Brexit vote was “an absolute disaster for a company the size of ours.” Spokespeople for Tetley Tea and Yorkshire Tea also said their companies were “mindful” of currency fluctuations.

Almost 90 percent of the tea products reduced in price were Fruit, Green or Herbal Teas, clearly targeting shoppers who were considering detoxing after Christmas.

The Wine category will also be significantly affected by the Brexit vote as it relies heavily on imports. According to the Wine & Spirit Trade Association the weak pound and potential future tariffs will increase the price of wines imported from the EU while the weak pound could also see the price of wines from outside the EU also rising.

The Red and White Wine sub-categories had the 13th and 14th greatest amounts of price cuts on 3 January 2017. When we looked at the country of origin of these wines we saw that the price cuts in both categories were made up of majority non-EU wines.

How competitive are Morrisons’ price cuts?

To analyse how competitive Morrisons shelf prices were, Brand View created a basket of the products the retailer reduced on 3 January 2017 and compared them to the shelf price of its rivals. We have also conducted this analysis on 4 January 2017 to see whether its rivals reacted to its reductions.

Predictably, the majority of products in the basket were indeed cheaper in Morrisons than its rivals on 3 January 2017. Asda were the most competitive of the retailer’s rivals. Just 64.1 percent of the comparable products in the basket were cheaper in Morrisons than Asda. Asda also matched the price of 27.7 percent of the basket.

Surprisingly, Waitrose – often perceived as the most expensive UK supermarket – had the greatest percentage of the basket (10.7 percent) that was cheaper than Morrisons.

Between 3 and 4 January 2017 there was little change in percentages in Asda, Ocado and Sainsbury’s. Waitrose increased the shelf price of 42 products overnight which led to Morrisons being cheaper on 86.6 percent of the basket on 4 January 2017 – up 5 percent on the previous day.

Tesco clearly reacted to Morrisons latest rounds of cuts as it reduced the shelf price of 124 items overnight. This led to Tesco matching Morrisons’ shelf pricing on 17.2 percent of the basket, up 4.8 percent, and being cheaper than Morrisons on 10 percent of the basket, up from 5.9 percent on 3 January 2017.

Morrisons will hope this latest ‘Price Crunch’ will help continue the turnaround it has been experiencing under Chief executive David Potts.

Not to be outdone, Asda launched its own campaign, a new stage of its “That’s Better” price cut initiative accompanied with a TV advert for its ‘50p cupboard favourites’. These cuts, combined with Tesco’s promise to match 60 percent of Aldi and Lidl’s own label products, illustrate the Big Four supermarkets’ commitment to keeping the gap in prices between themselves and the discounters to a minimum despite economic and political uncertainty.

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