Morrisons launches price war as sales tumble

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THE loss of customers to German discount stores Aldi and Lidl has forced Bradford-based supermarket chain Morrisons to unveil a radical price-slashing plan yesterday to protect its northern heartlands in a move which saw £650m wiped off its value.

The Wm Morrison company saw its stores haemorrhage shoppers to Aldi and Lidl over Christmas when customers were lured away by the promise of cut-price lobster, free range turkey, quality champagne and award winning Christmas puddings.

Morrisons at Foss Island, York

Morrisons at Foss Island, York

And it appears that since Christmas, the same shoppers have decided to stick with the discounters.

Market researcher Kantar Worldpanel said Morrisons’ sales fell 3.2 per cent in the 12 weeks to March 2 and its share of the market fell to 11.1 per cent from 11.8 per cent.

Morrisons’ shopper Lorraine Woodall, 56, of Killingbeck, said yesterday: “When I first started going to Aldi hardly anyone went, but now it’s busy. Everyone knows to go there now. The aisles are regularly packed.”

Julie Taylor, 48, of Harrogate, who was also shopping at Morrisons’ Hunslet store yesterday, added: “I’m surprised at the losses.

“I think it’s probably affected by Aldi and Lidl, but I think Morrisons is great value. I think it’s cheap and fresh and I think there’s a good choice.”

Over the key Christmas period Morrisons was by far the worst performer among the UK’s “big four” grocers, which are led by market leader Tesco, Wal-Mart’s Asda and Sainsbury’s.

Yesterday Morrisons’ chief executive, Dalton Philips, announced plans to slash prices radically and lure shoppers back in store.

“There has been a fundamental shift in how customers view discounters.

“They are now doing the full shop at the discounters,” he said.

“The rules of the game have changed. There is now a new price norm.

“The discounters are growing at a very fast rate and it’s impacting all of us.”

He refused to be drawn on just how much Morrisons will cut prices, saying the information is market sensitive, but he said the firm will close the gap on its German rivals.

The group will invest £1bn in total in price cuts over the next three years, including a £300m investment this year.

“We’ve already reduced the price of peppers, cucumbers, iceberg lettuce and meat,” said Mr Philips.

“We’ve now got the best price in the country on milk and chicken breasts.

“Chicken sales are up 37 per cent – we’re the cheapest in the market.”

While Morrisons is unlikely to ever match the discounters’ prices, Mr Philips said there is a tipping point where customers will decide that the range, fresh food and service they get at Morrisons is worth the little bit extra.

At the moment Morrisons sells 25,000 products, which is 12 times more than an average discounter’s 2,000 products.

The group is hoping that if it cuts prices to a similar level to the discounters, shoppers will 
decide the range offered by Morrisons makes it worth switching back.

Morrisons, one of Yorkshire’s biggest employers and its biggest listed company, will face stiff competition from arch rival Leeds-based Asda which outlined plans last November to invest £1bn in price cuts over the next five years.

The change of strategy triggered a 12 per cent fall in the group’s share price to 205p, which also hit the group’s market capitalisation, wiping £650m off the value of the group.

The company warned the City yesterday that profits will crash over the next few years as it invests in cutting prices rather than returning money to shareholders.