This week saw the first signs that crude oil and commodity prices – the conditions responsible for the rampant food price inflation we have – are abating. And not before time. As a number of expert commentators have observed, the balance between supply and demand has not altered sufficiently to warrant the outrageous swings in a number of key commodities. The conclusion has to be, at least to some extent, that inflation is being fuelled by panic. But then again, why shouldn’t it, when in boom times, the market is driven by hype?
In the meantime, as we report (p24), the supermarkets are becoming increasingly aggressive, with Asda stealing from Aldi the fixed price-point promotions it has pioneered since the start of the year to good effect; while Tesco is now distorting the ‘Why Pay More?’ strapline of Asda.
Nevertheless, I find it unlikely Tesco will jeopardise the profit margins it enjoys for an all-out war, even though Sainsbury’s and to a lesser extent Morrisons may be vulnerable. The same can’t be said for Asda, which could be used as a pawn in a larger game. As one commentator told me, Wal-Mart might use a UK price war, in Tesco’s most important market, to get back at the Cheshunt crew “for daring to pitch up in Wal-Mart’s backyard”. Its 50p price promotions certainly seem to be working, too. At 9%, it’s now matching Morrisons in terms of growth in till spend, according to TNS, while Tesco (6.5%) trails and Aldi (19.5%) trailblazes.
But the biggest losers in this war are not Tesco, or Sainsbury’s (5.6%), or Waitrose (4.8%) or Somerfield (3.8%). The sad fact is, as the multiples (and their suppliers) spend millions to support increasing price promotion, sales at the independents were flat.
In the meantime, as we report (p24), the supermarkets are becoming increasingly aggressive, with Asda stealing from Aldi the fixed price-point promotions it has pioneered since the start of the year to good effect; while Tesco is now distorting the ‘Why Pay More?’ strapline of Asda.
Nevertheless, I find it unlikely Tesco will jeopardise the profit margins it enjoys for an all-out war, even though Sainsbury’s and to a lesser extent Morrisons may be vulnerable. The same can’t be said for Asda, which could be used as a pawn in a larger game. As one commentator told me, Wal-Mart might use a UK price war, in Tesco’s most important market, to get back at the Cheshunt crew “for daring to pitch up in Wal-Mart’s backyard”. Its 50p price promotions certainly seem to be working, too. At 9%, it’s now matching Morrisons in terms of growth in till spend, according to TNS, while Tesco (6.5%) trails and Aldi (19.5%) trailblazes.
But the biggest losers in this war are not Tesco, or Sainsbury’s (5.6%), or Waitrose (4.8%) or Somerfield (3.8%). The sad fact is, as the multiples (and their suppliers) spend millions to support increasing price promotion, sales at the independents were flat.
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