Flight to value at Waitrose

As reported in The Times, Waitrose is seeing a ‘flight to value’ amongst its customers. The supermarket aims at a market segment of the higher socio-economic groups, and in order to retain them as customers seek to save money on their household bills is following a deliberate strategy of offering more ‘value line’ goods. Mark Price, Managing Director of the supermarket chain, said that goods sold on promotion had risen “substantially”, from 16 per cent to 23 per cent. He says that shoppers think that Waitrose is 25% more expensive than Sainsbury or Tesco, whereas independent research commissioned by the John Lewis Partnership (owners of Waitrose) shows that the price premium over Sainsbury is only 3.2%. At a time of recession this perception is something they want to correct as they have lost market share (currently 3.5%) over the last six months.

Part of their strategy is to introduce a new ‘essential Waitrose’ range, investing £47 million in reducing prices, and recognising that as people feel their disposable income is lower they may switch to cheaper products - reflecting negative income elasticity of demand for those inferior goods. Cheaper meats, such as pork, are outperforming costlier options, and sales of mackerel, the cheapest fish, rocketed by 60 per cent. So they are introducing cheaper, ‘forgotten’ cuts of meat such as pig cheeks and beef skirts alongside the sirloin steak and lamb medallions. No recipes for either on their website yet though… And they are not forgetting their staff – last week the John Lewis Partnership announced that despite a 20% reduction in profits to £407 million, they are paying staff (who are all partners in the business) an annual bonus of 13%.