The Co-op has poured fuel on the grocery price-cutting fire

Britain's biggest convenience store chain is 'investing' £125m in lower prices.

by Jack Torrance
Last Updated: 16 Jul 2015

Britain's dalliance with deflation may have been short-lived but it seems there's still life in the grocery price war. The Co-operative, Britain's fifth-largest food retailer and the biggest chain of convenience stores, said today that it will 'invest' £125m in cutting the price of fresh fruit veg.

The company says the price of 'some' fresh produce will be halved and that it's introducing a new revolving promotion, 'the fresh three', which will offer various packs of greens for the ludicrously low price of 39p each - starting with inceberg lettuce, carrots and cucumber. 

'Food retailing remains highly competitive and we have responded to provide customers with great prices and fresh, quality produce at each of our stores,' said Steve Murrells, the Co-operative Group's retail chief executive. 'This makes our price investment the biggest by a convenience retailer, providing consumers across the length and breadth of the UK with lower priced produce and helping them to keep shopping in their neighbourhood.'

Of course, you can't really 'invest' in low prices – it's a particularly annoying piece of jargon used by most of the big grocers, seemingly designed to convince shareholders that a race to the bottom is a good thing. But amid intense competition from discount supermarkets, it might seem like a necessary short-term step to maintain market share. According to Kantar Worldpanel, The Co-op's share of the grocery market has slipped from 6.8% in 2012 to 6% last month. Last week Moody's warned that Tesco, Sainsbury's and Morrisons couldn't afford to keep cutting much longer, but it seems the Co-op sees things differently.

Though it's certainly lost ground, the Co-op does have an edge on other grocers - its focus on convenience stores. 'Consumers are shopping differently, buying little, more frequently and, increasingly swapping the weekly shop for purchasing what they need, when they need it,' Murrells said.

While Tesco and Sainsbury's have found their out-of-town behemoths to be increasingly empty, hungry customers have been hitting the high street in their droves, leaving the big supermarkets in a rush to open smaller shops. The Co-op's well ahead of them. On the other hand, it's failed to reap the rewards of online sales that its competitors have, so things aren't all hunky-dory.

While it might seem like consumers have never had it so good, there are serious downsides to the bitterly fought price war. Retailers risk permanently destroying their own margins in a futile bid to maintain market share, while suppliers further down the supply chain get squeezed for all they're worth. For now though it seems grocers feel the main attraction for shoppers is low prices - and looking at Aldi and Lidl's explosive growth it seems hard to blame them.

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