Tesco and Wegman’s Step Up Pricing War

Grocers on both sides of the Atlantic are stepping up their price wars in the face of rising food costs.

Tesco, the UK’s largest supermarket chain, today launched a 200 million-pound ($324 million) campaign to let consumers know that it’s cutting the price of 1,000 everyday items. Shoppers who discover the goods at a cheaper rate at Wal-Mart Stores Inc.’s Asda stores will get vouchers equal to twice the difference.

Asda last month promised to be 10% cheaper than rivals or it would refund the difference. An earlier campaign by Asda promising to be cheaper than competitors was labelled misleading by the Advertising Standards Authority and ordered withdrawn after complaints by Tesco and William Morrison Supermarkets Plc.

And in the US, expect to see other retailers and perhaps other brands following the lead of Wegman’s supermarkets, which has pledged not to raise prices for the rest of the year on the “40 products that families buy most” — no matter whether their own costs increase, as expected.

Clearly, consumers are becoming more anxious generally, and especially anxious about prices. They hear about food-cost increases and low stocks around the world because of weather and unrest; they see gasoline prices jolting upward at the pump; and they act out their anxiety by reining in spending.

“We were beginning to see shopper concern about prices,” said Mary Ellen Burris, Wegman’s senior vice president of consumer affairs of the Rochester, N.Y.-based innovative chain.

So Wegman’s launched a program called Consistent Low Prices and applied the price-increase ban to a wide variety of items ranging from baby-cut carrots to coffee to rotisserie chicken.

The fact that nearly all of the products are Wegman’s private-label products adds to the savvy behind the move. The brand can ease shoppers’ fears about price inflation at the same time that it has an opportunity to boost regard for its own fare, perhaps picking up market share from CPG brands for the long term.

If such moves proliferate among retailers, will they put pressure on established food and beverage brands to respond somehow? The possibilities are fascinating.

And with inflation only expected to rise this year, perhaps significantly, American shoppers will be paying attention.

(Above: Alec Baldwin's holiday spot for Wegman's, co-starring his mom.)