This week all eyes were on an industry that supplies consumers with everyday essentials, weighs heavily on their household budgets, and has just started an almighty, possibly very bloody, battle over price. Yes, the energy sector was centre of the nation’s attention after SSE’s declaration it would freeze retail prices until 2016.
“Could a grocer do an SSE and freeze prices on selected lines for a guaranteed spell?”
Jon Yeomans, Web Editor
Now that’s how you start a price war. Forget talk of investing £200m here or £100m there. SSE at one fell swoop delivered a price promise that makes those in the grocery sector seem wholly under-powered. “Down and staying down?” For how long, exactly? SSE answered that conclusively, in a way consumers can easily grasp. It even saw its share price climb (Morrisons must have watched on ruefully).
SSE’s promise comes at a steep cost - in terms of jobs and investment. But it has reframed the debate. It’s all the more surprising when you recall how vehemently the energy companies reacted to Ed Miliband’s price freeze pledge last year. Such a move would “lead to unsustainable loss-making retail businesses”, said SSE boss Alistair Phillips-Davies at the time. Perhaps he was mindful of the looming competition inquiry. Or perhaps he decided it was worth it to be first. Either way, it’s an unexpected triumph for Miliband, after what was deemed to be a lacklustre response to the Budget.
Could a grocer do ‘an SSE’, and freeze prices on selected lines for a guaranteed spell - say, until 2016? It’s unlikely, though they have marketed ‘Price Locks’ and ‘Everyday Low Prices’ for years. It couldn’t be done without placing an eye-watering cost on suppliers. And in a business so prone to fluctuations from commodities to currencies, such a promise could seem unduly rash; a conscious uncoupling, if you will, from common sense.
But it’s not like the gas market isn’t volatile (and vulnerable to geopolitical shocks). With the big four occupying a narrowing middle ground, a bold move may be just the ticket to set them apart. Let’s not forget inflation is at its lowest for four years; it may not be the worst time to freeze prices on certain lines.
Indeed, it could be argued the discounters have already done an SSE, and continue to do so, day in, day out, via EDLP. No promos, no vouchers and no deals: just the certainty of lower prices. SSE has thrown down the gauntlet in its industry; the gauntlet for the grocers, while thrown, has failed to have the same impact. So far, at least.