A convenience grocery price war is bubbling up

It costs more because you have to pay for the convenience. Whisper it, but this well-worn trope of grocery retail may be changing – if only a little.

For the first time in a very long while, there seems to be a price war bubbling up in the convenience grocery sector. And that is good news for consumers.

On first glance, it could very well look like the big grocers are responding to recent criticism from the consumer group Which? and the grilling bosses received from MPs on the influential Efra committee. They argued that some of the most vulnerable shoppers were being unfairly hit with high prices in the midst of the cost of living crisis, simply because they can’t access the better value on offer at large supermarkets.

Certainly, this is something Morrisons CEO David Potts alluded to when the retailer announced the rollout of its budget own brand range Savers into Morrisons Daily convenience stores in July. Likewise, Tesco convenience MD Sarah Lawlor referenced customers watching every penny right now as the UK’s biggest grocer confirmed it was swapping out 50 “everyday products” with cheaper own brand and branded alternatives.

Co-op Member Prices was promotions based

While I don’t doubt the sincerity of these moves, I can’t help but think that as big a driver, if not the biggest motivating factor, is good old-fashioned competition.

Perhaps the most significant move on convenience pricing so far this year came from Co-op. Earlier this month the society, which in fairness has stocked its Honest Value own brand range for a number of years now, announced a £70m investment in cutting prices, primarily through its loyalty scheme.

When it launched in April, the Co-op’s Member Prices initiative was promotions based, but it has now been extended to permanently lower prices on 200 key convenience lines. Significantly, these prices have been benchmarked to be cheaper or in line with Tesco Express and Sainsbury’s Local.

C-store competition is hotting up

As with pricing moves at supermarket level, I am not expecting rivals to take this shot across the bows lying down, especially when c-stores are becoming an important growth channel for Asda and Morrisons as well.

So, the latest move on ranging at Tesco is unlikely to be its only response. Tesco has rolled out its Clubcard Prices initiative to Express stores, but as it stands this is promotions rather than pricing based, so there is room to go further there. Sainsbury’s has yet to extend its fledgling Nectar Prices scheme to Local stores, but that can’t be far off.

C-store competition is hotting up, but anyone expecting to find comparable prices to supermarkets any time soon will be sorely disappointed. Research carried out on behalf of The Grocer by ESA Retail in December found Tesco Express pricing was on average 10.4% more expensive than its larger stores, while the gap between Sainsbury’s superstores and Locals was 8.4%. These gaps have grown wider over the past 10-15 years: before then it was generally thought the pricing differential between smaller and larger stores tended to be around 5%.

A return to that kind of number would no doubt be most welcome for shoppers, but that seems highly unlikely, even factoring in the latest hostilities.