Co-op invests further in lower prices as ‘trolley wars’ beckon
Co-op Group has invested millions in lower prices as all the grocers gear up to battle for value-seeking customers.
The business, which is owned by its 5.5 million members, will invest more than £70m into matching prices with Aldi on 100 everyday essentials for its members.
The move will take the co-operative’s investment into lowering prices at its 2,300 stores to almost £170m over the last two years.
“In this current economic climate, price is most often the deciding food shopping factor for our members and customers,” managing director for Co-op, Matt Hood, said.
The move follows a similar investment by the company in 2023, when it invested £70m – then the society’s biggest-ever single investment in pricing it its history – in lower prices.
Co-op is the seventh-biggest supermarket in the UK by market share, according to Kantar.
But unlike discounters Aldi and Lidl, plus big-shop stalwarts Tesco and Sainsbury’s, it hasn’t been significantly growing its market share.
While Lidl’s market share shot up 8.1 per cent in the last year and Aldi’s rose 4.9 per cent, the Co-op only increased its take of the grocery market by 0.7 per cent.
“We know discounter prices are often the benchmark of value for consumers, and we are facing directly into that,” Hood said.
The battle for customers is on
The Co-op’s significant investment into lowering prices follows similar moves from Morrisons, Sainsbury’s and Asda.
Morrisons will shut 52 cafes and 17 convenience stores, planning to redirect cash to other parts of the business.
Sainsbury’s will axe 3,000 jobs and close all in-store cafes as part of plans to focus on fewer, bigger roles and to simplify its head office and management teams.
While these decisions have been partly fuelled by higher baseline costs to a hike in employer’s national insurance contributions and the living, there is also speculation Asda will shake up the market with a wave of price cuts.
“Trolley wars threaten to break out in the supermarket sector,” head of money and markets at Hargreaves Lansdown, Susannah Streeter, said.
“The supermarket chain is closing services seen as nice-to-have, but not essential, and scaling back its convenience footprint as it readies for a round of cost-cutting from rivals”.
Asda’s new chief Allan Leighton recently unveiled his turnaround plan for the struggling grocer and said he had a ‘war chest’ to invest in lower prices.
“Everyone is focused on making Asda the number one choice again for busy hard-working families who demand value,” Leighton said on an earnings call.
“This is what’s driving all of our actions across pricing, ranging, merchandising and every part of the business.”
‘Welcome relief’ for shoppers
While signs of a price war amongst the UK’s supermarkets might be sparking tough conversations in boardrooms, it’s a different story for customers.
“For shoppers… it’ll be welcome relief,” Streeter said.
“They had been bracing for further rises to be passed on by the grocers later this year due to their higher tax burdens, so a price war may lighten the load for struggling families, particularly those lower income households, where the weekly shop makes up a significantly greater proportion of their incomes.’’
Average grocery prices unexpectedly rose by three per cent in January and by 3.3 per cent in February, despite deep discounts.
“It’s hard to untangle the cost of living crisis from any post-Covid analysis, and [a big] headline of the past few years has been consumers’ hunt for value,” Sally Ball, head of retail at Kantar, said.
Looking at where supermarkets have been putting their money recently, it looks like the hunt for value is firmly setting the stage for a battle.