Morrisons fires gun on 'recession' price war

Supermarket giant Morrisons is poised to slash the price of hundreds of products as the industry braces for a major price war this autumn.

The chain will tomorrow cut prices by an average of 23 per cent on 400 products, including fruit and vegetables, meat, poultry, bread, breakfast cereal, rice, toilet rolls and cleaning products.

The launch counters a separate move this weekend by rival Asda which has set aside £100million for a price campaign that will also see its Asda Price 'pocket tap' revived.

Last night, Morrisons said its cuts were an acknowledgement that the country is 'now in recession and family budgets are under pressure'.

A spokesman said it would target items that made up children's school lunch boxes as well as cutting the cost of 'the nation's most often cooked meal' – spaghetti bolognese, with beef mince, ragu sauce and own-brand spaghetti all coming down in price.

A string of senior sources at supermarket giants have told The Mail on Sunday the industry is rapidly sliding towards a major battle on prices to lure cash-strapped shoppers and families.

They said executives are growing fearful that the country is heading for a severe economic downturn this winter in which millions could find themselves out of work, forcing them to shop for cheaper groceries.

Morrisons chief executive David Potts last night said his price cuts were not artificial and not temporary promotions.

He said the chain was 'cutting prices and holding them low' and promised the price cuts are 'not short term – these are price cuts that are here to stay'.

A senior supermarket source said Britain's largest supermarkets – Tesco, Sainsbury's, Asda and Morrisons – were desperate to take the lead after being blindsided by discounters Aldi and Lidl after the last major downturn more than a decade ago.

The source added: 'After the banking crisis, supermarkets were complacent and slow to react. They left a gap that allowed discounters like Aldi and Lidl to come in. They don't want to make the same mistake again.'

One supermarket chief executive confirmed he expected the public to become 'increasingly hard-pressed' as Chancellor Rishi Sunak peels back the employment furlough protection scheme between now and the end of October.

He admitted: 'All of this is a pressure cooker that will boil over this month as food retailers look to get very, very competitive on price.'

He said the industry had already observed growing price competition between Tesco and Aldi. 'They are price matching and now we are seeing Morrisons and Asda at it,' he added.

Supermarkets enjoyed a boom after most other retailers were forced to close between March and June. Sales rose across the board by 10 per cent, as customers were unable to eat out in restaurants and cafes during lockdown and bought all their food from grocery stores.

But the source added: 'Sales have cooled off a bit as people start to spend less money in supermarkets, and people start to eat out.'

The Asda Price 'pocket tap', with TV ads showing happy shoppers tapping their pockets, first appeared in 1977 as a way to demonstrate savings on offer at its stores. The company discarded it in 2007, but brought it back briefly in 2015 to mark its 50th anniversary.

Asda's latest cuts include products from its own-label ranges as well as big brands and from toys to toothpaste, breakfast cereals and meat.

A spokesman confirmed its latest Rollback event would focus on reducing the price of 'thousands' of products this autumn. 'Price and value is becoming increasingly more important to our customers as the financial impact of Covid-19 becomes more apparent,' he added.

Asda's latest cuts include products from its own-label ranges as well as big brands and from toys to toothpaste, breakfast cereals and meat.

Sainsbury's has already frozen the price on more than 1,400 household staples, including fresh and frozen produce, toiletries and homeware items.

Tesco has pledged to invest in making prices on everyday items cheaper, rather than offering promotions.

Clive Black, retail analyst at investment group Shore Capital, said: 'The supermarkets do reflect the economic concerns, the fact that there could be pressure on income.

'We've already seen supermarkets cutting prices on staples and narrowing the price differential with Aldi and Lidl.'

The latest moves by Morrisons and Asda, he added, 'represent a notching up of the competitive pressure in the industry'.

Source: This is Money