Pressure on Morrisons grows

Morrisons’ new chief executive Dalton Philips will have been in the hot seat for only about six weeks when the grocer delivers its first-quarter update next week. As such, the City is not expecting any major announcements of strategic overhauls and Philips will undoubtedly be taking his time to assess the business.

But judging by this week’s noise in the grocery world, Philips will have to signal that he is ready for the fight.

This week Asda - which has been trailing the market - hit back at competitors with a major pricing campaign. Being the cheapest grocer has always been Asda’s mantra, but this week it has put its money where its mouth is, saying it will guarantee it is the cheapest grocer or give customers their money back. And it will be comparing itself to Morrisons, Tesco and Sainsbury’s.

Asda’s move shouldn’t unsettle Philips just yet. In this week’s Kantar Worldpanel figures, Morrisons maintained a strong performance, while Asda’s year-on-year growth of 2.5% was well behind the other major grocers. But Asda’s move will keep the pressure up on price on all its rivals. And unlike Tesco and Sainsbury’s, Morrisons doesn’t have a loyalty scheme to back up any price promotions.

In the short term, perhaps Philips should be more worried about Tesco’s return to form. The market leader delivered a solid performance last week, and in the Kantar figures its Clubcard Double Points scheme has helped it get back on top. Its market share has increased to 30.5%, up from 30.3% last year. And Tesco will continue to drive Clubcard hard this year.

Philips has big strategic issues to consider, most notably multichannel, but this year - especially with inflation stripped out of food - price will be paramount. Tesco being on top form is enough to scare anyone, but with Asda in fightback mode, Morrisons should watch out. Of course, part of the reason Philips wanted to move to the UK was to engage with what is one of the most competitive grocery markets in the world.