Price will continue to dominate grocery debate

By: Dean Best - 16 July 2007 15:28

Despite all the talk from the likes of Tesco boss Sir Terry Leahy that consumers are spending more on “high-quality” food, price remains a key competitive weapon for UK retailers.

Over the weekend, Tesco, the UK’s largest retailer, launched an aggressive TV ad campaign highlighting the differences in price of a range of products at its stores compared to those found at rivals Asda and Sainsbury’s.

It’s interesting to see this apparent change in emphasis. Sir Terry and others in the grocery sector have argued that factors like rising interest in food provenance and cooking is driving growing UK food expenditure as a proportion of total consumer spending.

However, both Tesco and Asda have announced a swathe of price cuts in recent weeks, a sign perhaps that the companies are aware that a succession of interest rate rises could soon begin to hit shoppers in the pocket.

Demand for natural, organic and functional food – all generally more expensive than conventional items - seems reliant on the health of the economy; if there's a downturn, "premium" foods would most likely be among the first goods consumers cut back on as they tighten their belts.