Blog: Dean BestWaitrose puts words into action

Dean Best | 2 May 2012

"What you'll see this year is Waitrose become more price competitive," Mark Price, the upmarket UK retailer's managing director, said in March. Today, the company indicated it would act on those words with two announcements - with Tesco, Sainsbury's and Ocado in the firing line.

Waitrose is matching the price at which Tesco sells 7,000 brands, up from 1,000 lines. It is also offering free delivery to those that order at least GBP50 (US$81) worth of groceries online.

The extension of Waitrose's Brand Price Match scheme, which was launched two years ago, is a shot across the bows of Tesco, which is battling to revitalise its UK operations after quarters of falling sales.

However, the retailer is also taking aim at Sainsbury's, which has enjoyed success with its own price-matching initative, Brand Match.

Shore Capital analyst Clive Black said Waitrose's move would "nullify some of the benefit that has accrued to Sainsbury from what has been a remarkably effective Brand Match initiative".

Waitrose's success in convincing shoppers it can offer value (through schemes like its price-matching initiative and its Essential own-label portfolio) and remain a high-end retailer through marketing tie-ups with celebrity chefs like Heston Blumenthal. The success is seen in its sales figures. Its like-for-like sales in the year to 28 January increased 3%, a rate faster than a number of competitors.

However, competing on price dampened profits last year and initiatives like the extension of Brand Price Match could have an effect on earnings. That said, investment in space and new formats also had an effect on profits and Price said in March he hoped earnings would grow in 2012.

Waitrose's price-matching of brands on sale at Tesco is also similar to an initiative at Ocado, its partner outside the M25.

The extension of the scheme, as well as Waitrose's offer on online delivery, will only put more pressure on Ocado.

The online retailer reported an increase in sales in its first quarter but questions surround the company's prospects, despite a narrowing in its losses in its last financial year.

Black said Waitrose's offer was a "material challenge" to Ocado in Greater London, where the two partners are competitors. Greater London is, Black said, Ocado's "core and most profitable market".

A sign that Ocado is aware of the challenge it faces, not just from Waitrose but from other competitors, is in just-food's latest Promo Tracker data.

Ocado stepped up the level of discounts it offered in April in a mixed month of promotional activity among UK retailers, the Tracker, compiled with mysupermarket-insights.co.uk, showed.


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