Morrisons moves price up the agenda as it looks to become ‘more competitive’

As the competition to be seen as the best value supermarket in the UK hots up, Morrisons is working on becoming “more competitive” on its price proposition.

In September, the supermarket slashed the price of more than 400 grocery essentials by an average of 23%. However, rivals such as Tesco and Asda have all also been working to lower their prices, with Tesco launching its Aldi Price Match scheme and Asda making £100m in price cuts last year.

It’s a challenge that Morrisons CEO David Potts is all too aware of. Speaking on a call with press this morning (11 May), he said: “We are a great value food retailer. That is our job. So during this year… we will become more competitive again.”

Potts added: “We wake up every day thinking about how competitive we can be, rather than what margins we might aspire to.”

Despite increasing its average score for value perception by 3.8 points to 24.6 over the past year, Morrisons dropped from fourth to fifth place in the supermarket rankings on YouGov’s BrandIndex. Aldi tops the list with a score of 53.2, followed by Lidl (48.9), Asda (27.7) and Tesco (25.1).

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Morrisons has also been rethinking how it attracts and engages with customers through loyalty. Yesterday, the supermarket launched a revamped version of its loyalty scheme, with an ‘instant money’ offer replacing its previous points and vouchers based system. The ‘My Morrisons’ scheme has also switched out the supermarket’s physical loyalty card for an app.

According to Potts, the refreshed scheme is “bang on trend” with how consumers now want to shop.

“Consumers are looking for instant gratification, gamification, instant coupons, surprise and delight moments,” he said, adding that the introduction of the My Morrisons app makes the brand feel “a little bit more naturally digital”.

The scheme is part of Morrisons wanting to become “a place people quite like to go”, Potts continued. That ambition has so far included modernised cafes, the introduction of barista bars, new vegan and fresh food brands, and ensuring friendly staff.

We wake up every day thinking about how competitive we can be, rather than what margins we might aspire to.

David Potts, Morrisons

In terms of marketing communications, Potts said this will be an “important year” for investment. He wants consumers to have opportunities to reassess the brand throughout the year, and while he did not offer any exact figures or plans, he said Morrisons will reach consumers “any way we can”.

“The year ahead will be very important as society moves forward [and] we’ll be in there presenting ourselves across all of the traditional media, social media, and in any way we can,” he said. “I would have it down as an important year ahead for investment.”

Although vague on details, Potts suggested the brand is likely to launch a campaign to broadcast its decision to bin plastic carrier bags once and for all by this time next year, replacing them with paper alternatives.

The move will remove approximately 100 million bags from circulation, Potts estimated, stating he is feeling “very confident” in the impact the initiative will have on consumer perception of the brand.

Expanding with Amazon

For the 14 weeks to 9 May, Morrisons posted a 2.7% rise in like-for-like sales. The supermarket’s online business, including Morrisons.com and its partnership with Amazon, recorded year-on-year growth of 113%, now accounting for more than 10% of group sales. Potts noted that this is the level of growth Morrisons would have expected over five years.

Amazon is Morrison’s fastest growing online channel, he confirmed, adding that it continues to grow even as online growth within the overall market and for Morrisons itself begins to slow. The partnership allows customers to order Morrisons food via Amazon, opening up the group to a huge market of Prime customers.Morrisons hails Amazon partnership a ‘kicker for sales’

The supermarket has added its Amazon service into six additional UK stores, now totalling 65, and according to Potts, the service is likely to expand into more stores over the course of 2021.

Morrisons previously posted a dramatic profit fall of 50.7% to £201m in the year to 31 January, almost totally due to the cost of operating during the pandemic.

The supermarket incurred a further £27m of Covid-related costs during the first quarter of 2021, but says there were “encouraging signs” of lower direct costs and the recovery of profit lost due to the pandemic in areas such as fuel and food-to-go as the period progressed.

It now expects profit before tax and exceptionals for this year to be higher than the £431m it would have achieved for its 2020/21 financial year had it not waived the £230m business rates relief.

“The pandemic is not yet over, but it is in retreat across Britain and there is much to be positive about as something approaching normal life begins to take shape,” Potts said.