Waitrose’s plan to avoid losing sales to Aldi during the cost of living crisis

Choose your battles wisely, the old saying goes. Well, Britain’s poshest supermarket is taking the adage firmly to heart.

In its annual Food & Drink report this week it revealed even its own wealthy customers were making economies, with sales of spam and fish heads soaring – but the retailer is not setting out its stall based on price. 

It’s sticking to its guns, doubling down on its commitment to premium quality and ethical sourcing credentials.

So what exactly is it up to? What new tricks does it have up its sleeves? And will it be enough to maintain loyalty at a time when shoppers are trading down?

On the face of it, Waitrose is really up against it. Sales fell 3.1% in the latest quarter, despite rampant inflation. Only the newly indebted Morrisons is faring worse at 3.9%.

On the other hand it’s all relative: it’s losing less sales to Aldi than any of the major mults (see table). And though sales fell 5% on a like-for-like basis to £3.6bn over the six months to 30 July, that’s still 7% up on pre-Covid levels. What’s more, customer transactions were up 14% year on year, with the fall in basket sizes (down nearly a fifth) reflecting a broader move away from big basket online shops.

Not that Waitrose is complacent. While explicitly ruling out compromising on product specification or sourcing standards to lower prices, Waitrose is doubling down on its differentials, shaking up its range, adding a tsunami of exclusive products and embarking on ambitious, collaborative plans with suppliers to make sure its offer can’t be imitated.

Deliciously Different

Like its new tie-up with Deliciously Ella. The two have partnered for an exclusive brand utilising only natural ingredients called Plants by Deliciously Ella, which could eventually span some 100 SKUs – almost a new tier to its own-label.

“We were one of the first retailers to really cater for plant-based diets, so it’s important that we’re still leading this movement, and reminding customers that we’ve got new and exciting options on offer,” says Waitrose head of grocery & frozen Giles Fisher.

It’s also working more collaboratively on merchandising, with moves such as installing Montezuma’s branded festive chocolate bays. Sentinel Management Consultants CEO David Sables believes this shows Waitrose is “thinking more long-term about what a brand can do to access new shopper loyalty, rather than how much a supplier can be fleeced for siting”.

That being said, Waitrose has far from given up on its value products. In April it mounted a massive push for Essentials, including an ad on London’s Piccadilly Circus billboard screens. Fisher stresses the retailer is “extremely focused on making our shopping basket staples as affordable as possible without compromising on what’s important to our customers”. He argues Essentials is “the most extensive value range of any UK supermarket”.

Value also features heavily in the new Food to Feel Good About TV ad campaign, which launched in September. Ostensibly focused on its ESG credentials, it argues that ‘good values can be good value’.

Read more:

• Return of Spam and fish head soup as Waitrose prepares for austerity

• Waitrose’s free coffee returns, but its Caffè Nero tie-up is the real news

• Deliciously Ella links up with Waitrose for massive plant-based range

With moves like these, Waitrose is embracing who it is and what it stands for. “They are being sensible and not trying to hide from who they are,” says Sables.

The ad campaign also makes an overt play for customers trading down not to discounters or to lesser-specced products but to shoppers cutting back on hospitality spend. ‘Can eating in be as good as dining out? We think it can,’ it argues. 

The fact it’s launched a new £12 Dine In offer underlines the point, and provides M&S with some timely (though some would say overdue) competition.

And of course, there’s the return of free coffee for loyalty card holders thanks to a new partnership with Caffè Nero.

These are bold plans – but the scale of the challenge remains considerable. IGD global insight leader Bryan Roberts says initiatives like the new products and the return of free coffee “bode well” for Waitrose and he agrees they help “underline its status as a premium supermarket”.

“That said, it is not alone in collaborating with brands for branded fixtures. Premium positioning needs to be backed up with premium availability and premium service and the jury is still out on both of these.”

Roberts makes a good point. Waitrose’s availability was certainly strong during the pandemic lockdowns, but availability as measured by its score in the Grocer 33 has fallen from 93.4% in 20/21 to 91.9% in 21/22, and is tracking at 91.0% in the YTD for the 22/23 Grocer 33 competition.

Shopper loyalty

The relaunch of myWaitrose in February has also underwhelmed shoppers. Waitrose says it’s only at the foothills of the mountain it has to climb in using its data properly, but it’s only going to get better as it evolves the loyalty card. And at a Waitrose Christmas event in London this week, CEO James Bailey revealed that an email campaign about eating on a budget, showcasing recipe cards for £2 per portion meals, had one of the highest hit rates so far. So the value messaging is getting through.

All eyes now will be on how it performs over Christmas. With a 34-strong lineup of new festive products, it’s confident it can play to its strength, but Fisher says it wants to use its exclusive ranges to “drive customers back to our stores year on year”. Staff will be hoping for this too, because without a “substantial” strengthening of performance, JLP chair Sharon White has said the group will struggle to pay a partnership bonus.

The stakes for Britain’s bougiest retailer are high.