Leading grocer Sainsbury’s is to launch a Brand Match initiative, in response to the value offers rolled out by competitors in recent weeks, it was announced today.
Brand Match will see the supermarket give customers coupons to the value of the difference of their grocery shop should it have been cheaper at Asda or Tesco, including any promotional deals that are running.
Following a trial at Sainsbury’s 12 supermarkets in Northern Ireland, where it has been overwhelmingly well received by shoppers since its introduction, the retailer believes that this is a more efficient way to ensure value than those methods offered by its competitors.
Tesco’s Big Price Drop, launched last month, saw a major overhaul of the price of thousands of own branded products, following a £150 million investment from the company.
Rejected as “spin” by an Asda spokesperson, the move has seen others launch value campaigns promising to reduce pressure on cash-conscious consumers.
Last week, upmarket grocer Waitrose unveiled plans to focus on value for money, reducing the price of thousands of its products via initiatives including deals and promotions.
While Tesco’s programme sparked suggestions of a price war, this latest reduction plan by Sainsbury’s has been lauded as a “sensible reassurance process” by analysts.
Clive Black, Director, Head of Research at stockbrokers Shore Capital, believes that, while this latest move helps customers avoid being ripped off at a time of genuine economic constraint, “price war” comments are exaggerated.
“Tesco has reallocated resource within its value mix through its ‘Big Price Drop’ that should be broadly neutral for the retailer and, if it gains volume traction, a benefit both in terms of scale and working capital…‘If’, and to be fair to Tesco’s management it is not over-promising at this stage,” he commented.
“We continue to believe that the Big Price Drop is not the commencement of a price war.
“Asda has a competitive price file and it should not need to do anything to improve that position versus Sainsbury’s.
“Since the launch of Tesco’s initiative, Asda has dropped the price of bananas, a key volume line in-store, from 68p/kg to 58p/kg (which will be costly to the trade) and milk; both of which tend to be ‘unbranded’ or classed as private label. That said, to our minds, Asda remains a rational value based supermarket.”
Black noted that, while Waitrose has entered the fray following its announcement last week, other ‘big four’ supermarket Morrisons has maintained its strong promotional offer and focused on its ‘M Kitchen’ offering prepared food at wholesale prices.
Mike Coupe, Sainsbury’s Group Commercial Director, feels that the company’s new promise separates it from others, saying: “Unlike some of our competitors we aren’t asking customers to do the hard work to check on our prices.
“We know shoppers don’t want the hassle of having to enter different pieces of information on their computer at home before having to then print out a coupon just to check they are getting the best deal. We are so confident that our prices are competitive with Asda and Tesco that we are happy to do the legwork for our customers.
“The launch of Sainsbury’s Brand Match across the UK represents a revolution in retail and is fantastic news for hard-pressed shoppers. We have been listening to feedback from consumers and they tell us that stretched budgets mean they are shopping around to get the best deals on the brands they love.
“We have always believed that our own brand food is the best of all the supermarkets but now customers can be assured that at Sainsbury’s they will no longer pay more for their basket of grocery branded goods then they would at Asda and Tesco.”
However, Black fears that this high level of competition could have a detrimental impact on Sainsbury’s.
“The current trading and economic environment displays vulnerability for Sainsbury’s in particular in our view as Sainsbury’s is already less expensive versus Asda and Tesco than it used to be, demonstrably so, but further closing a narrower gap will probably cost the retailer some gross margin,” he warned.
“We will keep watching trading activity with close interest but the run-up to Christmas is not a conventional price war time.
“Therefore, we see more of the same for now; subdued volumes, stable mix, persistent inflation - which may now fall to a degree to be replaced with some volume - and stable gross margins.
“Food retailers also continue to remain much more resilient versus the general retailers’ where stress persists. Hence, we see merit in the ownership of supermarket shares, reflected in our stock recommendations.”