Grocers slash prices in battle to keep customers spending

The big four grocers have kick-started aggressive new year promotional campaigns. Morrisons vowed to help customers beat the VAT increase and Asda guaranteed it will be at least 10% cheaper than all of its major rivals.

Tesco also waded into the promotional war with a £340m new year blitz, launching ‘better than half price’ deals on brands such as Kellogg’s, Persil and Heinz, while Sainsbury’s kicked off its ‘biggest ever’ Boxing Day Sale, with £30m of savings on non-food items.

Morrisons said it would reduce the price of an average grocery basket by £39.27 a week, equating to a saving of £2,042 per year. It said savings would total £210m in January.

Morrisons group commercial director Richard Hodgson said the first day of the Price Crunch, on January 4, was “phenomenal”. He said: “We have reduced the prices of key commodities when customers are now worrying that they might have spent too much over the festive period.”

While he could not reveal figures - the grocer updates on Monday - he said trading was “tough because of the snow” but that Morrisons would be “more than satisfied” with its figures. He said the Price Crunch would continue for the rest of the year and Morrisons would “keep it fresh”. He said: “We strive for Waitrose quality but we are going to charge Asda prices.”

On Thursday Asda extended its Asda Price Guarantee claiming it is 10% cheaper than its major rivals. The guarantee, which launched in April, gives customers a refund voucher if they find their shopping would have been cheaper at a rival.

Asda chief executive Andy Clarke said it gave the Asda price promise a “copper-bottomed guarantee”.

Shore Capital analyst Clive Black said Morrisons appeared to have “upped its game” in promotions this year, which he said “may show it needs to inject some more momentum”. He said the grocers would “fare okay” in the first half but the outcome of the northern hemisphere harvest would affect prices and therefore performance later in the year.

Asda reported a “good performance” in the run-up to Christmas. It said December 23 was its busiest day.

Rival Sainsbury’s will report next Wednesday and Tesco on Thursday. Ocado will report on Monday alongside Morrisons.

Waitrose reported like-for-likes up 5.9% on the five days to December 31. That followed a strong Christmas, when like-for-likes for the 23 days to December 23 rose 5.4%.