Has food retailing ever been so competitive?

The current cost-of-living crisis has put a greater focus than ever before on where to do your food shopping and what it will cost. The options have never been greater, particularly if you are able to order on-line and get a home delivery.

In a city like Hull you have the choice of a Tesco Extra at St Stephen’s shopping centre, ironically on the site of the former Northern Foods plc headquarters and the Northern Dairies Park Street Dairy; a Tesco Superstore on Hall Road on the way to Beverley; and no fewer than ten separate Tesco Express convenience stores.

Sainsbury’s has one Superstore at Hessle and another at Hedon, supported by several Local convenience stores. Asda has three Superstores at Hessle, Kingswood and Bilton plus two Supermarkets and an Asda On The Move. Morrisons has three supermarkets in Hull, Anlaby and Beverley as well as a Morrisons Select and a Morrisons Daily.

By contrast with the Big 4 multiples, Waitrose has just the one supermarket at Willerby and M&S, having closed its much-missed store in Hull’s Whitefriargate, now has Simply Food outlets at Kingswood and Anlaby. M&S has its joint venture with Ocado and all the multiples offer home delivery, which boomed during the Covid lockdown.

The Grocer magazine, which is the food industry’s bible, provides a useful weekly shopping basket of over 30 items, comparing prices across all the food retailers. It now includes Amazon which came out cheapest of the lot in week 34 with a basket price of £73.03 against an average across all listed retailers of £80.49. Sainsbury’s came out second lowest and Asda and Tesco all came in below the average.

It was probably no surprise that Waitrose was the most expensive with a basket price of £92.27, almost £20 (26%) more expensive than the lowest. Waitrose has a very loyal following of more affluent customers who much prefer the shopping experience there. In the same copy of The Grocer Waitrose’s store at Thatcham in Berkshire came out top in the magazine’s analysis of service and availability, edging out Morrisons’ store at Totten in Hampshire and miles clear of Asda, Tesco and Sainsbury’s.

It is interesting to note that ‘availability’ now features for The Grocer’s Mystery Shopper, as increasingly multiple retailers find themselves with empty shelves, particularly in the fruit and veg aisles. This is scored alongside everything from the car park, through store standards, layout and floor service, to the checkout.

Waitrose has clearly recognised that it is off the pace when it comes to cost and it is reported to be spending £100 million on reducing prices on over 300 own-label lines, including 250 of its Essentials range. This is in response to a fall in sales in Waitrose’s latest quarterly figures. It is unclear how much of that pain will be borne by Waitrose suppliers.

Mention must be made of the discount retailers, principally Aldi (9.2% Kantar market share) and Lidl (7.1% share), which continue to expand and both are approaching a thousand stores in the UK, albeit that Lidl has scaled back to 25 openings this year. The location of many Aldi and Lidl stores, often close to the major multiples, suggests that customers are being enticed to drop in at the discounters as part of their main weekly shop. The down-market stigma has long gone as consumers hunt for value.

Interestingly, The Grocer has also reported that Tesco has stepped up its Aldi Price Match, now keeping pace with 669 of the discounter’s products. Sainsbury’s has a similar scheme, matching 313 Aldi products. This reflects Aldi being the fastest-growing food retailer, up 26.9% year-on-year in Kantar’s figures for the 12 weeks to 22 January 2023.

All of this goes to show how competitive the market has become. With consumers suffering from sky-high energy costs and double-digit inflation, the full range of retailers from premium to discount cannot afford to drop off the pace on price.

The retailer most at risk appears to be private equity-owned Morrisons with sales and profits both in decline, whilst labouring below a £7.5bn debt burden. This has resulted in ratings agency Moody’s downgrading Morrisons and changing its outlook to ‘negative’. The fact that Morrisons came in as the most expensive of the big 4 major retailers in The Grocer’s shopping basket perhaps reflects its financial constraints. Highly-leveraged financial buy-outs are not looking attractive in the demanding food retail sector.