It looks as though the grocers have enjoyed a strong Christmas trading period. Availability in the stores seemed strong and there were some very impressive new ranges particularly in fresh foods. There was a marked change in the focus of the main grocers, with less emphasis on price and more on product last year, which will hopefully continue.
The strong numbers from the food division of M&S combined with good like-for-likes at Waitrose suggests quality is becoming more important. Customers are responding to retailers with a greater emphasis on quality and service.These retailers are, to an extent, setting the agenda for others, but others are catching up. There has been greater investment in premium NPD and in the pre-Christmas period ad spend to communicate new ranges and ideas.
The premium tier has never had more exposure in the major grocers. Finest, The Best, Taste the difference and Extra Special brands were all expanded considerably last year, and even the major discounters have been introducing more credible premium-tier products.In that context it is perhaps even more surprising that there have been media reports of price-cutting initiatives at Sainsbury's,Tesco and Asda. Actually, we shouldn't be too surprised, given that every January we are confronted by thousands of price cuts and forecasts of a price war. It is always more hype than substance .
Reviewing any list of price cuts usually confirms that most of the eye-catching reductions are on low- selling products and very few are on the core products in a customer's shopping basket. There is never any likelihood of a price war - all the key players understand how easy it is to lose gross margin and how difficult it is to generate sufficient volume to achieve a payback.
Any genuine price reductions will be subject to supplier support and will not cost the retailer very much. This year, more than ever, suppliers are less able to respond. If anything, the pressure is on cost increases. For these reasons, this month's price cuts will be less relevant than ever before to customers.
The focus of competition this year will continue to be in the areas of range, quality and service. Waitrose and Marks & Spencer will have to work hard on innovation to keep ahead of the pack, and the bar may be raised even higher when Whole Foods Market opens in Kensington this spring.
The strong numbers from the food division of M&S combined with good like-for-likes at Waitrose suggests quality is becoming more important. Customers are responding to retailers with a greater emphasis on quality and service.These retailers are, to an extent, setting the agenda for others, but others are catching up. There has been greater investment in premium NPD and in the pre-Christmas period ad spend to communicate new ranges and ideas.
The premium tier has never had more exposure in the major grocers. Finest, The Best, Taste the difference and Extra Special brands were all expanded considerably last year, and even the major discounters have been introducing more credible premium-tier products.In that context it is perhaps even more surprising that there have been media reports of price-cutting initiatives at Sainsbury's,Tesco and Asda. Actually, we shouldn't be too surprised, given that every January we are confronted by thousands of price cuts and forecasts of a price war. It is always more hype than substance .
Reviewing any list of price cuts usually confirms that most of the eye-catching reductions are on low- selling products and very few are on the core products in a customer's shopping basket. There is never any likelihood of a price war - all the key players understand how easy it is to lose gross margin and how difficult it is to generate sufficient volume to achieve a payback.
Any genuine price reductions will be subject to supplier support and will not cost the retailer very much. This year, more than ever, suppliers are less able to respond. If anything, the pressure is on cost increases. For these reasons, this month's price cuts will be less relevant than ever before to customers.
The focus of competition this year will continue to be in the areas of range, quality and service. Waitrose and Marks & Spencer will have to work hard on innovation to keep ahead of the pack, and the bar may be raised even higher when Whole Foods Market opens in Kensington this spring.
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