Tesco boss continues to make strides against Aldi’s price challenge

Tesco boss Ken Murphy was understandably not for playing ball when asked what the price gap between Tesco and its all-conquering discounter rival Aldi now was.

But there was no doubting the confidence about the claim he did volunteer; that Tesco has managed to halve the gap since it launched the Aldi Price Match Scheme in March 2020.

The change is even more marked further back, with Murphy declaring: “Compared to what it was in 2008, the gap between us and Aldi is now four times smaller.”

Indeed, rewind to October 2008 and Aldi had just enjoyed its strongest sales to date – little change there then.

The difference, of course, was that back then Tesco was being shown to be clearly the most vulnerable to Aldi’s advances.

Tesco has no fewer than 650 Aldi-matched prices

“The majority of our growth is coming from the big four supermarkets, particularly Tesco,” Aldi director Graham Hetherington, said at the time.

Today’s figures suggest Tesco is not about to repeat the same mistakes, which, retrospectively at least, its former CEO Sir Terry Leahy was widely accused of making by underestimating the threat posed by the then new breed of rival.

Thanks to the work of Dave Lewis, which has been successfully continued under Murphy’s leadership, Tesco appears to be in a very different place this time round.

The supermarket boasts no fewer than 650 everyday products linked to Aldi’s prices under the matching scheme, with a further 1,500 locked to those at B&M and Home Bargains.

Last month it locked a further 1,000 prices on top of previous cuts until into the New Year, which Murphy declared will ensure Tesco goes into the vital Christmas period as the best value “full line” retailer.

Again, it’s very different to the past, with Tesco in 2008 having half-heartedly re-branded itself as ‘Britain’s biggest discounter’ without putting the money into price cuts to back it up.

If there is one downside, of course, it is being felt by Tesco’s suppliers.

Murphy won’t lose sleep over any GCA spanners

Murphy says it is “working together” across the supply chain to tackle inflation and lead the way towards deflation in the market.

But with last week’s report by the Groceries Code Adjudicator accusing supermarkets of turning to “combat” rather than “collaboration” widely seen as a shot across the bows to Tesco, there is likely to be more pain ahead, especially with its major range reset still in its relatively early days.

Today certainly didn’t give the impression Murphy would be losing any sleep about any spanners the adjudicator might throw into the works.

At the moment, as Shore Capital Analyst Clive Black points out, Tesco is very much a “well-oiled machine” and the figures are going to be painful reading, if not so much for Aldi, but for the others in the pack, who will be wondering how they can compete.

Whilst suppliers will, rightfully, be expecting a brutal few months ahead.