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UK's Morrisons cuts more prices to combat discounters
April 30, 2014 / 11:01 PM / 3 years ago

UK's Morrisons cuts more prices to combat discounters

* Morrisons cuts prices on 1,200 products by an average of 17 pct

* Cuts will absorb “a big part” of 300 mln stg set aside for 2014-15

* Move comes a week after Tesco cut prices on basic food items

By James Davey

LONDON, May 1 (Reuters) - Wm Morrison Supermarkets, Britain’s fourth largest grocer, unveiled a second round of price cuts designed to win back trade lost to the fast-growing discounters.

Morrisons in common with its three biggest rivals - market leader Tesco, Wal-Mart’s Asda and J Sainsbury - has been losing market share to German discounters Aldi and Lidl.

In March, the firm said profits would more than halve this year as it set out a plan to try and restore its low-price image with shoppers by spending 1 billion pounds ($1.7 billion) cutting prices over the next three years. A move that sparked fears of an industry price war.

The northern England based grocer said on Thursday it would cut prices on 1,200 own-label and branded products, by an average of 17 percent, following the first round of cuts on basics like milk, fruit and chicken fillets in March.

“We see this not as a price war but more as a declaration of independence,” Chief Executive Dalton Philips told reporters, noting the new cuts would account for “a big part” of the 300 million pounds set aside for reductions in 2014/15.

Morrisons gave as examples of its latest reductions, 500 grams of beef mince down 20 percent to 199 pence, a six pack of own brand crisps down 34 percent to 85 pence and Jammie Dodgers biscuits down 55 percent to 49 pence.

The price cuts will be backed with a new TV, billboard and print marketing campaign and a new price comparison website, powered by mysupermarket.co.uk, it said.

Morrisons’ move comes a week after Tesco announced a round of price cuts on basic food products and reduced its online shopping charges.

Morrisons has fared the worst of the big four supermarket chains in terms of losing customers to discounters and has also lagged peers in entering fast-growing online and convenience markets.

The shares have lost nearly a quarter of their value so far this year and are trading near eight year lows.

Philips said that turning around the group’s overall performance was not going to be quick and underlying sales were unlikely to improve any time soon.

“Our lower prices automatically and inevitably reduce the actual sales going through our tills. Quite simply its deflationary,” he said.

“I am absolutely confident that, as we aggressively close the price gap (with discounters), our points of difference will shine through,” he added, pointing to Morrisons’ vastly bigger range, in-store services and uniqueness among Britain’s grocers as a major food manufacturer.

Philips said he was also confident he had the support of big investors after holding meetings with 100 institutions following the company’s results in March.

“There is really strong understanding and support for what we outlined which is the market is structurally changing ... I’ve been really encouraged by the dialogue that we’ve had with shareholders,” he said. ($1 = 0.5936 British Pounds) (Reporting by James Davey; Editing by Elaine Hardcastle)

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