Aldi promises to maintain low prices despite profit slump

As Aldi and Morrisons battle to be the UK’s fourth largest supermarket, both grocers are investing to keep their prices low amid the rising cost of living.

AldiAldi has promised to maintain its low prices in the UK as the cost of living crisis intensifies, despite reporting an 86.5% drop in pre-tax profit for its 2021 financial year.

Although sales were up 0.9% to £13.6bn, Aldi UK made a pre-tax profit of £35.7m in 2021, down from £264.8m in 2020. According to the privately-owned discounter’s annual trading statement, operating profit was down 79% from £287.7m to £60.2m.

UK and Ireland CEO Giles Hurley says preserving Aldi’s price discount “will always be more important” to the business than “short-term profit”, adding “being privately owned means we can keep our promises even when times are tough”.

He explains: “The cost of living crisis is worsening, and it’s being felt by millions of households across the UK. It’s in times like these when our customers rely on us the most, which is why we’re focusing on continuing to deliver our longstanding price promise by offering the lowest possible prices in Britain, every single day.”

The supermarket says it will do “whatever it takes” to maintain its discount against rivals, Hurley adds. The business says its buying teams are working “tirelessly” to counter the impact of inflation.

According to price comparison analysis for August, conducted by consumer group Which?, Aldi is currently the UK’s cheapest grocer on a basket of 47 everyday items, with an average price difference of £13.53 against Tesco, Asda, Morrisons and Sainsbury’s.

Preserving our price discount and rewarding our people will always be more important to us than short-term profit.

Giles Hurley, Aldi

Although sales growth in the UK and Ireland slowed in 2021, trading has accelerated “quickly” over the past six months as pandemic restrictions have lifted and rising living costs have affected shopping habits, Aldi says.

The discounter won over an additional 1.5 million customers in the past 12 weeks, taking its total customer base to 14.2 million. The business claims more of its existing customers are consolidating their grocery spend and are now using Aldi as their only supermarket.

Meanwhile, sales of the grocer’s Specially Selected premium range increased 29% in the last 12 weeks.

With more than 970 existing stores already, Aldi plans to open a further 16 before the end of 2022. Its ongoing £1.3bn two-year investment pledge will also include expanding or relocating “dozens” of existing stores and developing its network of distribution centres and technology infrastructure to support growth.Cost of living crisis helps Aldi bounce back into BrandZ top 100

Morrisons rivalry heightens

Earlier this month, Aldi officially became the UK’s fourth largest supermarket, taking the position from Morrisons for the first time. The discounter grew sales by 18.7% over the 12 weeks to 4 September, according to the latest data from Kantar, meaning it now has a 9.3% market share.

Morrisons, meanwhile, saw its sales over the same period drop by 4.1%, which resulted in its share falling to 9.1%.

As it works to claw share back, Morrisons has today (26 September) announced a reduction in price on 150 of its more popular products, covering nearly 6% of the supermarket’s total volume sales. The price slashing represents an investment of more than £100m per annum.

Among the cheaper products are cupboard staples, fresh and frozen foods and everyday essentials such as toilet paper and cleaning supplies. For example, Morrisons’ two litre bottle of original thick bleach will now cost 95p, down from £1.35. The price of 1kg of Morrisons easy cook long grain rice has been cut from £1.49 to 95p, and a 500g of Morrisons 5% fat British steak mince 5% is down from £3.69 to £2.89.Morrisons moves price up the agenda as it looks to become ‘more competitive’

According to the grocer, these cuts will offer customers an average saving of 14% on their shop.

“The cost of living crisis continues to place an enormous financial burden on our customers and we want to play our part in helping them when it comes to the cost of grocery shopping,” says Morrisons’ CEO David Potts.

“These price cuts are on the products they buy day in and day out and will have a noticeable impact on their budgets and demonstrate our commitment to offering the best possible value.”

Morrisons will communicate its price cuts to customers through print advertising, radio, digital, online and in-store point of sale.