Why – and where – supermarkets are making range cuts

First it was Asda, called out by Jack Monroe in January for axing a number of its value products while hard-pressed families struggled to eat. Now the spotlight is on Tesco, as The Grocer this week reveals it has been cutting its value range while growing its premium lines.

Tesco is the only one of the big four to have slashed its value range in the past year, according to exclusive data for The Grocer from Assosia.

However, range cuts are being made elsewhere. Co-op, for example, warned suppliers last week to brace themselves for delistings, as “habits and choices have been continually changing” since the pandemic.

So, who has cut the most from their ranges? And why are they going down this route?

Assosia data drawn from the websites of the big four, Waitrose and Ocado shows most supermarkets have made cuts since August 2021.

Morrisons leads the way, having shed 8% of SKUs. Those cuts largely took place late last year, with 1,681 lines ditched between August and December.

Tesco, Asda and Waitrose made smaller cuts, while Ocado stayed flat. Sainsbury’s was the only one to go the other way, with range growth of 4%.

One motive behind cutting lines will be to compete with Lidl and Aldi on price, says David Sables, CEO of Sentinel Management Consultants. That’s particularly true in the case of Morrisons and Asda.

“You have to remember [they]are the ones that lost their market position to the discounters,” he points out.

Andrew Cole, MD & co-founder of Bridgethorne, says cutting ranges can be an effective way to manage costs. “There’s less coming through the supply chain, less through the store,” he explains.

Retailers are “getting thousands and thousands of cost price increases”, so “they’ve got to cut costs in lots of different ways”, Cole adds.

Supply chain

Cost-cutting isn’t the only motivation, though. The past year has been fraught with supply chain issues – and cutting ranges can enable retailers to better focus on getting products into stores.

In Aldi’s full-year results last September, CEO Giles Hurley claimed its smaller assortment had enabled it to maintain good availability overall while its rivals struggled.

That point is echoed by Paul Stainton, a former Aldi and Co-op executive, who is now a UK partner at International Private Label Consult.

“Availability has been an issue and a lot of the mults have thought it better to have a smaller range and better availability than a bigger range and lots of gaps on shelves,” he says.

But cuts haven’t been applied evenly across the board. Assosia data shows certain categories have shrunk more than others in the past year.

Babycare ranges, for example, are down an average of 11% in Tesco, Asda and Morrisons. Stainton argues the move is overdue, as retailers have been keen to “increase, increase, increase” in this category.

“They wanted to capture the young mum from an early stage, and there’s been lots of new pack sizes and food product extensions in baby ranges. So, I’m not surprised by the cut.”

Similarly, petcare ranges have decreased across Morrisons, Ocado, Tesco and Waitrose. Ocado saw the biggest drop, at 32%; Morrisons has cut 20%.

“Petcare is quite similar to baby,” says Stainton, in that it has been expanded in a bid to encourage shopper loyalty.

For suppliers, range reductions have likely become all too familiar. In the early stages of the pandemic – from March to July 2020 – The Grocer reported 9% of products had disappeared across the top six supermarkets. Many suppliers saw this as a temporary measure.

But two years later, The Grocer’s data shows no major supermarket has recovered the size of its pre-pandemic range.

Compared with August 2019, Asda’s range is 23% smaller and Sainsbury’s is 15% smaller. Morrisons, Ocado, Tesco and Waitrose have all seen decreases of at least 6%.

It’s a trend that’s unlikely to end here; experts believe the cost of living crisis will continue to drive retailers to make cuts across many areas.

Clive Black, retail analyst at Shore Capital, believes the knife could soon come for “undifferentiated” categories, such as household goods, ambient grocery and frozen items.

These are “big built lines” at a time when “one doesn’t need a huge choice”, he says.

But it may not be bad news for all suppliers, suggests Bridgethorne’s Cole. “If you’re a new company or you’ve got a new product, it’s even harder to get the retailer to look at those new ideas because they’re cutting back,” he says. “But if you’re in, it’s a really good thing, because you’ve got a bigger share of a range.”

The retailers downplayed the cuts in their responses to The Grocer. Morrisons said it used a “clear criteria” to ensure “the right breadth of offer, product availability, value for money and channel proposition”

Tesco and Waitrose both said range reviews were continual, with Tesco saying it involved “simplifying them where necessary to improve availability and reflect our customers’ evolving needs”. Waitrose, meanwhile, said it was to “ensure we continue to offer great value as well as distinctive quality and welfare while removing areas of duplication”.

Asda pointed to its category transformation programme, announced last year.

Sainsbury’s said Assosia’s data did not appear to match its own, adding: “We regularly review our ranges to make sure we offer our customers the best possible choice and value.”

Ocado also said its data differed, adding: “We currently have more than 50,000 products – more than double that of our nearest competitor.”

Still, the direction of travel seems to be towards smaller, rather than larger, ranges.