Asda is courting controversy again with full-page ads for price cuts enraging growers and farmers. Its price cuts last week have sparked an all-out supermarket price war.
Tesco set the ball rolling as it said it plans to invest £270 million in price cutting. The UK number one is slashing the prices of more than 3,000 products as it responds to tougher competition from the reviving Sainsbury’s and Morrisons, as well as established number two Asda.
The cuts are already affecting fresh produce lines with 10p slashed off the price of individual beef tomatoes. Asda reacted immediately and straight away produce was caught in the crossfire as the price for a kilo of loose bananas tumbled to 59p. The Leeds-based chain is embarking on a £250m spree that will eventually affect 10,000 products across food, clothing, and general merchandise.
But Asda’s price-slashing frenzy, which was accompanied by full-page advertisements in the national press, has angered farm representatives.
NFU president Peter Kendall expressed his dismay at this proclamation of commitment to long-term cheap food. Kendall said the tactic would be hard for farmers and growers at the sharp end of food production to stomach.
“While supermarket giants have been engaged in chest beating over cheap prices to the consumer they have been making very large profits,” he said. “They have made those profits and kept their prices down by squeezing suppliers’ margins to the point where many of them have gone out of business.
“As producers we truly understand that consumers need high quality food at best value but everyone should consider the issue of sustainability.”
The Fresh Produce Consortium also sounded a word of warning. “It is useful that retail prices are at a level that encourages consumption, but it needs to be borne in mind the importance of maintaining a level that supports all of the supply chain,” said FPC chief executive Nigel Jenney.
Asda told freshinfo it is footing the entire bill for the cuts, and in the case of bananas, its supplier Del Monte Fresh Produce (UK) md Peter Miller confirmed this. “Asda is taking the hit on this,” he said. “We were unaware until we read about it in the newspapers and I genuinely believe they are paying for it out of their own pocket.”
And Tesco was defiant about its cuts. “Tesco funds all its price investment,” said a spokeswoman. “There might even be a positive impact as volumes will be much higher. We won’t apologise for offering really cheap prices for healthy items such as fruit and veg.”
Morrisons has also thrown its hat into the ring with 2,000 price cuts announced on Tuesday to be effective within the next two weeks. Separately, this week the retailer launched its summer price freeze guaranteeing that baskets of selected fresh food items, which are already competitively priced in the market, will not increase in price for the rest of the summer.
Produce lines affected immediately are Galia melons down from 139p each to 100p and 1.13kg pre-packs of Royal Gala down to 100p from 109p. “There will be more items from produce frozen all summer long,” said a spokeswoman. Unlike Tesco and Asda, she could not confirm Morrisons was footing the bill and that suppliers would not be asked to fund some of the cuts.
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