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Morrisons' Biggest Investment Is The Aggressive Cutting Of Prices, Says Kantar Retail

Published on Mar 12 2016 10:15 AM in Retail tagged: Investment / Morrisons / Prices

Morrisons' Biggest Investment Is The Aggressive Cutting Of Prices, Says Kantar Retail

Morrisons' biggest investment, both in terms of money and energy, continues to be the aggressive cutting of prices, believes Kantar Retail's senior analyst Simon Johnstone.

The analyst's comments come in the week that Morrisons reported underlying pre-tax profits of £242 million for the year to 31 January, a drop of £103 million on the previous period.

Like-for-like sales (excluding fuel and VAT) fell by 2 per cent.

Total turnover was down 4.1 per cent to £16.1 billion.

"This [aggressive cutting of prices] has allowed Morrisons to shore up falling sales and momentum looks likely to continue following the announcement it has overtaken Asda as the cheapest supermarket, following its 1,000 price cuts earlier this year," said Johnstone.

"With discounters Aldi and Lidl rapidly improving their fresh credentials and its supermarket peers continuing to cut prices on fresh and chilled foods, the onus is on Morrisons to supplement this new-found price advantage with added service," he added.

That means building a more compelling offer and leveraging its in-house strengths such as its bakery section, upgrading traffic driving categories such as wine and providing a more localised offer.

"The issue for Morrisons is how are they going to differentiate themselves when most of their initiatives will also be a key strategic focus for Asda, Sainsbury’s and Tesco.”

The grocer has indicated that customers can expect to see more price cuts in the near future.

Speaking on the yearly results this week, Morrisons CEO David Potts said, "By improving the shopping trip for customers, we have started the journey to turn around the business and make our supermarkets strong."

Meanwhile, last month, Morrisons and internet retailing giant Amazon announced a new supply agreement that will mean hundreds of Morrisons products will be available to Amazon Prime Now and Amazon Pantry customers in the UK in the coming months.

The supermarket chain will provide a wholesale supply service to Amazon, allowing the pure-play online retailer's customers access to the grocer's ambient, fresh and frozen products.

"We are focussed on our six priorities to make the supermarkets strong again. In addition, we have an opportunity to build a broader business that complements our supermarkets and is consistent with our commitment to pursue capital light growth. Wholesale supply enables this by growing volumes and leveraging our manufacturing, distribution and wholesale capabilities," said the supermarket in a statement.

Speaking on the Amazon agreement, Morrisons chief executive David Potts said the agreement was built on Morrisons unique strengths as a food maker.

"The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling. This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months.”

Morrisons is also in discussions with Ocado to grow the Morrisons website - an agreement in principle has been reached, according to the supermarket.

This involves Morrisons taking space in Ocado’s new Customer Fulfilment Centre in Erith, and Ocado delivering a store pick solution for Morrisons that leverages Ocado’s technology and Morrisons store assets.

When implemented, this would enable Morrisons.com, working with Ocado, to sell to customers all around the UK.

© 2016 European Supermarket Magazine – your source for the latest retail news. To subscribe to ESM: The European Supermarket Magazine, click here.

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