The major supermarkets continue to invest in reducing prices as they battle the growth of the discounters. Through its Match & More card, Morrisons pledged to match Aldi and Lidl last month while Sainsbury’s said it would invest £150m per annum cutting prices.

It’s easy to see why price has become the battleground for our major multiples when most of the growth in grocery is, according to Kantar Worldpanel, coming from the discounters. Analysis of unit price data - across some 7,500 products sold in grocery stores - shows that prices have been falling since April 2014 by -1.3%. But despite this, sales volumes continue to decline. IRI sales data shows an overall volume decline for packaged groceries (excluding alcohol) of 2.7% for the 52 weeks ending 11 October 2014. 

“If shoppers aren’t winning, then the supermarkets aren’t either”

Why? One reason: the price war and persistent promotions have only saved the average household £1.56p per week! That’s the cost of 2kg of granulated sugar. Over the past 12 weeks, the savings versus the same period in 2013 amount to just over £2 a month. This is unlikely to make a significant impact on shoppers’ budgets as they continue to face rising costs, flat wages and looming Christmas and winter fuel bills. 

With a higher number of products sold on promotion in the UK than anywhere in Europe or the US, some shoppers take advantage by only buying their favourite brands when they are on offer. Consumers are also shopping at different supermarkets (including the discounters) to get the best deals, buying less or moving to cheaper alternatives; not necessarily choosing own label any more than before as the national brands keep up their promotional pressure. 

This behaviour is really the strongest indicator available that the price war among UK supermarkets is having no significant impact on total sales growth. 

If shoppers aren’t winning, then the supermarkets aren’t either. At the current rate of change, the price wars will cost them around £1.5bn annually, on top of any continued loss of sales to the discounters. 

Continuing the downward spiral of price promotions is unlikely to keep shoppers loyal to a single store and makes them more price sensitive than they were previously. 

Unless the supermarkets think differently about pricing and promotion, they will struggle to find paths to growth. Clearly, price wars are an initial reaction to address discounter competition but it would be surprising to see retailers committing to a strategy based only on price cuts. 

The major supermarkets need to recognise that the discounters have a role to play in a newly defined retail landscape. Price doesn’t have to be their only offer. 

The store experience should not be underestimated as a way for all grocers to provide consumers with additional value - easier and faster shopping, helpful staff, the right products on shelf, themed events and superior service can all keep shoppers returning to a store. 

Investing in price wars is an oxymoron. They may be a battleground, but they should most definitely not be considered the only path to future growth.

Tim Eales is strategic insight director at IRI

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