Huge price investments by the major multiples have begun to close the price gap on Aldi and Lidl, Sainsbury’s boss Mike Coupe has insisted.
Speaking as the chain unveiled a fourth quarter like-for-like fall of 1.9% - beating market forecasts of a 3%-plus slump - Coupe said Sainsbury’s prices relative to the discounters had improved by 9%. “We have invested a lot of money in core commodity products such as milk, bread, eggs and fruit & veg.” It’s paying off, he insisted.
Sainsbury’s saw volume growth of around 3% in the 1,110 products in which it has cut prices. Coupe was also encouraged that sales volumes increased 3% despite the like-for-like sales decline, which he blamed on food price deflation of 2.5% in the quarter.
However, while “headline figures show some evidence that growth at Aldi and Lidl might have peaked, it’s still too early to call the turn,” he added.
Kantar Wordlpanel data shows Aldi and Lidl grew 19.3% and 13.6% respectively in 12-weeks to 2 March. But Aldi was close to 40% growth in April 2014.
“You could extrapolate, albeit very early days, that we are seeing a return to volume growth in our business, but let’s not get too carried away, we still have to be cautious given the market backdrop.”
Another effect of the base price cuts is that Sainsbury’s has significantly cut its promotional participation, which according to CFO John Rogers fell 300 basis points year-on-year to 33%.
In the 10 weeks to 14 March Sainsbury’s total sales were down 0.3%, excluding fuel and 2.7% down including fuel.
Shore Capital’s Clive Black said: “Whatever the numbers, the price differential between the LADs and the big four has structurally narrowed.”