Waitrose's pledge to match Tesco's pricing on key branded lines could be costing the retailer up to 200 basis points, industry insiders have warned.
Exclusive figures compiled by BrandView.co.uk for The Grocer have revealed the chain is currently matching Tesco on 1,917 branded lines - almost double its original pledge of 1,000 in September.
Experts have warned Waitrose's margin would be severely hit if it continued to follow Tesco after the latter's announcement of £200m of price cuts last month in response to Asda's 10% cheaper pledge.
"I'm not sure how Waitrose and Ocado can keep matching Tesco," said one senior industry source. "About 80% of its branded volume would be with these items. When you consider Tesco's buying power is six times greater, it must be hitting Waitrose margins by 200 basis points."
"The boys at Waitrose have got themselves caught in the price war crossfire," added a supplier. "It must be costing them a fortune."
Waitrose confirmed it had moved pricing in response to Tesco but maintained it was happy with the policy.
"Where Tesco has moved non-promotional prices of the lines we are matching, we have reduced these prices," said a spokeswoman. "We are pleased with the impact of Branded Price Match on basket size and customer frequency."
The tactic has been central in helping Waitrose record its highest-ever market share, according to Kantar Worldpanel retail analyst Fraser McKevitt. "Waitrose followed the market trend of slightly slower growth this period, but still posted increased sales of 6.6% compared with a year ago, taking its market share to 4.4%, the highest-ever recorded by the retailer," he said.
BrandView.co.uk also revealed the overall price gap between Waitrose and Tesco had increased since the initial pledge. The week of the announcement, Waitrose's price premium over Tesco was 6.9%. This week it was 8.8% higher.
Tesco closes pricing loophole exposed by mystery website (25 March 2011)
As Waitrose matches Tesco, is Price serious about price? (analysis; 2 October 2010)