Asda, Morrisons cut prices of key items amid British spending squeeze (updated)

MccollS Retail

25/04/2022 08:30

* Asda cuts the prices of over 100 essential items
    * Asda to invest 73 mln stg to lower prices
    * Morrisons cuts the prices of over 500 products

 (Recasts with Asda price cuts)
    By James Davey
    LONDON, April 25 (Reuters) - Asda and Morrisons said they
would cut the prices of essential items on Monday, ratcheting-up
competition in Britain's food retail sector against a backdrop
of soaring inflation.
    Surging prices are causing the biggest squeeze on household
incomes since at least the 1950s in Britain, where grocery price
inflation hit 5.2% over the four weeks to March 20, the highest
level since April 2012, industry data last month showed.
    Supermarket groups typically try to keep down the prices of
so-called known value goods, of which shoppers instinctively
know the cost, while pushing up the prices of others.
    Asda, Britain's third largest grocer after market leader
Tesco  TSCO.L  and Sainsbury's  SBRY.L , said it would invest
more than 73 million pounds ($93 million) to cut the prices of
over 100 items, including fruit and vegetables, meat, rice and
noodles, and has "locked in" those prices until the end of 2022.
    The group, owned since February last year by brothers Mohsin
and Zuber Issa and private equity company TDR Capital, said that
on average, prices for the 100 items will drop by 12%.
    Meanwhile Morrisons, the fourth biggest player, said it was
lowering prices on more than 500 essential products, which
together cover 6% of its total volume sales.
    Morrisons, owned since October by U.S. private equity firm
Clayton, Dubilier & Rice, said its price cuts were in items such
as eggs, baked beans, rice, coffee, cereals, chicken, sausages
and nappies. It said the average saving was 13%.
    
    'COMPARE AND SAVE'
    Morrisons has also introduced new "multi save" promotions,
such as two boxes of cereal for 1.8 pounds ($2.30) and a
"Compare & Save" campaign to help shoppers identify savings that
can be made by swapping branded items for its own products.
    Monthly industry data has shown Asda and Morrisons
consistently lagging Tesco and Sainsbury's, who have both been
price matching German-owned discounter Aldi on essential items.
 urn:newsml:reuters.com:*:nL5N2VV1DL
    However, earlier this month Tesco warned of a drop in
profits this financial year.  urn:newsml:reuters.com:*:nL5N2WB14U
    Britain's overall inflation rate hit a 30-year high of 7% in
March and is expected to peak at nearly 9% later this
year. urn:newsml:reuters.com:*:nL5N2WB138
    A survey published on Friday showed UK consumer confidence
slumped to its lowest level since records began nearly 50 years
ago.  urn:newsml:reuters.com:*:nL5N2WJ5AJ
    Asda said its own data found Britain's lowest income
families had 74% less disposable income in March compared to the
same time last year.
    It also said it was increasing the pay of its 120,000 shop
floor workers to 10.10 pounds per hour from July, as well as
giving them a bonus opportunity.
    Separately on Monday, convenience store group McColl's
 MCLSM.L , with whom Morrisons has a wholesale supply agreement,
warned on profit after a poor Easter and said a refinancing of
the business could wipe out the value of its equity.
($1 = 0.7790 pounds) 

 (Reporting by James Davey; Editing by Frank Jack Daniel and
Alexander Smith)
 ((james.davey@thomsonreuters.com))