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How has Asda responded to Morrisons’ ‘Price Crunch’ campaign?

By Chris Elliott

Asda announced a round of price cuts on 9 September, shortly after Morrisons revived its ‘Price Crunch’ campaign, and in response to a tough few months in which sales have been lost to discounters Aldi and Lidl.

Newly-appointed Chief Executive Officer, Sean Clarke said, “we will continue to listen to our customers and take action, with better prices for products they buy week in, week out” (Retail Week).

In its statement, Asda revealed that its price cuts would focus on basic products such as, “fresh meat and fish, bread, cheese, tomato ketchup and wine,” all advertised under the accompanying marketing campaign entitled “That’s Better”.

How did Asda’s price cuts assortment differ from Morrisons’?

Brand View has identified and reviewed the 609 products that were reduced in shelf price on 8 September 2016, one day before Asda’s official “That’s Better” campaign launch.

The majority of Asda’s price reductions – 95.2 percent – were on Grocery items. Morrisons also focused heavily on Grocery price reductions in its most recent price cuts. On 30-31 August 2016, some 91.1 percent of the retailer’s price reductions were on Grocery items.

Ambient Foods had the greatest proportion of price cuts of the Grocery categories, differing from Morrisons, where only 19.2 percent of Grocery item price cuts were on Ambient Foods versus 57.8 percent on Chilled Foods.

Which categories experienced the greatest number of price cuts?

Brand View identified the top ten categories with the greatest number of SKUs reduced in price – nine of these categories were Ambient Foods, while the tenth was Cooked Meat. This differed from Morrisons’ approach – the majority of the categories were Chilled Foods.

The category that had the greatest number of products reduced in price was Cooking Sauces. Own Label products accounted for 27 of these products, while the remaining 21 were branded cooking sauces, such as Patak’s (12) and Dolmio (4).

Of the categories that had the greatest number of price reductions, Cereal Bars had the greatest average percentage decrease in price at 34.3 percent, while Cooked Meat had the lowest at 10 percent.

The categories with the lowest average percentage decrease in price were predominantly comprised of Own Label products, while categories with a greater proportion of branded products accounted for greater average price reductions. This pattern was also observed in Morrisons’ most recent cuts.

Cooked Meat appeared in both Asda’s and Morrisons’ top 10 price cut categories. There were only three products common to both Asda and Morrisons price reductions — two Douwe Egberts Coffee products and one Aunt Bessie’s Yorkshire Pudding product.

Is Asda’s pricing more competitive following the cuts?

Brand View has benchmarked the shelf price of products reduced in price by Asda on 8 September 2016, to an equivalent basket in its rival retailers before and after its price cuts, using the Brand View Price Index report.

Before the price reductions of the 609 SKUs, the retailer was the most expensive for these products, while after the reductions it was the cheapest.

Morrisons was the most competitive retailer on price before Asda’s price reductions on 7 September 2016, while Ocado was the least competitive — Morrisons was on average 13.5 percent cheaper, while Ocado was on average only 1.3 percent cheaper.

On 16 September 2016, following the price cuts, Morrisons remained the most competitively priced retailer, while Ocado remained the least. Morrisons was on average 19.3 percent more expensive, while Ocado was on average 28 percent more expensive.

How did Asda’s cuts affect the price of a sample basket of branded goods?

Despite the “That’s Better” campaign’s focus on the quality of Asda’s Own Label lines, the majority of Asda’s price cuts on 8 September 2016 – 72.6 percent – were on branded items.

Brand View has reviewed the pricing of a sample basket of 15 branded products to identify how Asda’s price cuts affected its competitive price position.

On 7 September 2016, Asda was the sole cheapest retailer on just one product, ‘Billington’s Caster Sugar 1000g’, and the joint cheapest retailer on just one product.

However, after its price reductions it became the sole cheapest retailer on four products – ‘Robinsons Lemon and Grapefruit 1000ml’, ‘Billington’s Caster Sugar 1000g’, ‘Guinness Black Sauce 295g’ and ‘Barr Cola Bottle 2000ml’ and the joint cheapest retailer on seven products.

How is the supermarket price war likely to develop?

Asda reported its worst quarterly performance ever in August 2016, with a 7.5 percent fall in like-for-like sales. This poor performance followed a statement in June from the Chief Executive of Walmart International, Dave Cheesewright, which said that Asda would shift its focus from protecting profit to growing market share.

Analysts have raised concerns about the lack of promotion of Asda’s recent price reductions. HSBC analyst, Dave McCarthy, said “we’ve seen nothing by way of advertising or any promotion in stores.” Despite these concerns surrounding Asda’s lack of PR, Brand View found that Asda did become much more competitive on price for the products featured in its price reductions campaign.

Asda’s price reductions focused mainly on Ambient Foods, while Morrisons’ most recent reductions focused on Chilled Foods. In addition, Morrisons increased the number of price cuts on Frozen Food products in its most recent ‘Price Crunch’, with cuts on Frozen Food products accounting for 20 percent of Grocery items reduced in price. In a recent Insight Brand View discussed the growing popularity of frozen foods in Britain’s households — in the 52 weeks to 13 September 2015, the value of the retail frozen food market grew by 0.4 percent year on year to nearly £5.8 billion (Kantar Worldpanel).

Retail analysts expect Tesco and Sainsbury’s to respond to these cuts in the coming weeks. When considering the growing shopper tendency towards frozen foods, these retailers may focus cuts more heavily in this area.

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