Tesco forced to slash prices by Aldi and Lidl

The arrival of the supermarket discounters has forced Tesco to put the brakes on food price rises, according to new research. In the past ten years, prices at Tesco have risen just 12% over the whole period - compared to 38% in the five years from 2000 to 2005.

The research, by mobile price app Can I Eat It? looked at how the price of 20 of the most popular branded groceries changed between 2000 and 2005, and then again between 2010 and 2015. In some cases - such as a box of cornflakes and a loaf of white bread - prices are lower now than they were five years ago.

The whole 15-year period has been marked by low inflation (by historical standards), so this cannot be blamed on the general inflation backdrop. Instead, two other forces are at work: the changing face of British supermarkets; and the increasing willingness of British shoppers to hunt for bargains.
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The cost of groceries soared in the first five years of the study, and for most of that period, the discounters had less than 2% of the market each, and were considered niche players. Over the past ten years, however, the picture has changed radically. Aldi's market share has grown from 1.4% to 5.4% and Lidl's from 1.8% to 3.8%, and shoppers are no longer embarrassed to admit they shop at a discounter.

Cutting prices

Meanwhile the bigger players are all down from their peaks, and many of them have decided that the only way to get back in the game is by slashing prices. Morrisons has announced it will slash £1 billion off prices over three years. Its enthusiasm for cuts may well be to do with the fact that as the smallest of the big four supermarkets, it's likely to be the first to be overtaken by one of the discounters.

Sainsbury's, meanwhile, has slashed prices by £50 million this year alone. Of all the big four, it has lost most market share since its peak in 1990, so is committed to ensuring that is not eroded too much further. And even Tesco has cut prices - including knocking 25% off 380 branded items back in January.

The future

The trend is unlikely to be reversed in the near future. The discounters are in the middle of major expansion plans - at a time when the bigger players are scaling back their ambitions. More stores in more areas will tempt even more people away from the big four - and should mean they are forced to slash prices even further if they are going to compete.

Martin Isark, founder of the price tracing mobile app Can I Eat It? said in a statement: "The big supermarkets have been forced to cut prices by the rise of Aldi and Lidl. It shows competition works. And the big names are going to have to continue trimming prices if they are to stop more and more of their shoppers moving to Aldi and Lidl."

But what do you think? Have to switched to a discounter? Let us know in the comments.

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