‘This grocery ‘price war’ is less battle, more ballet’

While the UK retail industry has been buffeted by a seismic set of forces over the last few years, it has been spared the prospect of a bloody price war – until the last few months, when aggressive statements of intent across grocery have appeared to light the touchpaper on a new era of price competition.

However, scratch beneath the surface and the dynamics playing out across UK grocery right now are less battle and more ballet.

Yes, pricing is competitive. But what’s unfolding is not the brutal, margin-annihilating war many fear – it’s a carefully choreographed price dance, performed by sophisticated grocers navigating the fine tension between affordability and viability.

That distinction matters. A true price war is a hostile affair, where retailers slash indiscriminately to gain share. History would tell us that this often comes at the cost of long-term profitability to all sides – something the grocery sector can scarcely afford to suffer.

What we’re seeing today is something subtle, tactical moves designed to appear aggressive while smartly preserving margin wherever possible. The UK’s grocers are simply too squeezed, and too strategic, for anything else these days.

What’s unfolding is not the brutal, margin-annihilating war many fear – it’s a carefully choreographed price dance

Let’s start with the numbers. Retail margins have been on a decade-long decline. From 6.9% in 2012 to just 4.9% in 2023, the sector has been weathering a steady erosion of profitability. While brands, logistics firms and retail media players have expanded their take, grocers’ slice of the pie has shrunk, despite shouldering the costs of operations, customer experience and now digital infrastructure.

With that context, it’s clear grocers – or, indeed, any retailers – can’t afford an all-out price war. Operating costs remain elevated. Labour, energy and transport expenses haven’t meaningfully fallen, and the capital required to maintain store standards makes it essential to protect ‘four-wall’ profitability.

It is also not clear that blunt-force price action talks the language of the modern consumer. Shoppers may be price-sensitive, but they’re not blind to value beyond the shelf label. There is a reason Aldi and Lidl have seen their shares stabilise over recent years despite maintaining a 10% price advantage over the historic big four. Store convenience and experience, breadth of choice, loyalty schemes, and product innovation all matter too. And that’s where the smart players are doubling down.

It’s clear grocers – or, indeed, any retailers – can’t afford an all-out price war

Take Tesco’s Clubcard Prices or Sainsbury’s Nectar. These aren’t blanket price cuts, they’re precision tools. They target spenders who already have one foot in the loyalty ecosystem, using discounts as data-generating hooks and drivers of wallet share. The idea is simple, offer value but focus it on those worth fighting for. This is not trench warfare. It’s a carefully planned, asymmetric retailing routine.

Meanwhile, discounters like Aldi and Lidl continue their steady advance, but their explosive growth years are behind them. Store expansion is slower. Their value proposition is well known, and most UK shoppers already combine trips to a discounter with one of the big four. There’s less new ground to win, less marginal volume to gain from just hammering home a price advantage and more effort going into retention and basket expansion.

There are, of course, pockets of real competition. Essentials like milk, eggs and pasta are being fiercely priced. But that’s always been true. What’s changed is the intensity of the communication. Grocers are picking their battles, loudly sacrificing margin on key items to signal affordability while quietly defending it elsewhere and particularly building high ground around their private label.

There’s no doubt that pricing will remain under the microscope. But that doesn’t mean we’re on the verge of open conflict

In this light, the price war narrative misses the mark. It invites panic when what’s actually happening is a repositioning, a move from blunt price matching to smart price signalling. This is a dance choreographed not only to hold ground with consumers, but also to steady relationships with suppliers and investors alike.

If anything, this moment should be a cue for retailers to step back and rethink value creation altogether – most likely doubling down on their loyalty strategies at the same time. Just as brands are learning to partner with retailers more intelligently, so too should retailers look to monetise their assets more creatively, whether through retail media networks, loyalty data platforms or upstream logistics plays.

There’s no doubt that pricing will remain under the microscope. But that doesn’t mean we’re on the verge of open conflict. Instead, the future lies in carefully coordinated movements – retailers balancing price, perception and profitability in a way that keeps both shoppers and stakeholders satisfied.

It’s not war. It’s choreography.