Tesco starts price war with Aldi

British supermarket chain Tesco will lower the prices of hundreds of products to the level of Aldi’s prices, and emphasise that with “Aldi Price Match” signs in the shelves.

Red prices at Tesco

The initiative applies to both branded and private label products and applies both online and in the physical stores of the British market leader. Tesco does not say exactly how many products are involved, but emphasises in a press release that the campaign covers high-rotation products such as bananas, cucumbers, avocados, Greek yogurt and sliced toast bread. It is particularly noteworthy that the retailer explicitly refers to one of its competitors, on distinctive red labels in the shelves and in online communication.

Tesco still has a 27.2 % market share, but is under increasing pressure from hard-discounters Aldi and Lidl. They have been opened a lot of new stores and, according to Reuters, have grown to a combined market share of 13.7 % – more than three times the level of a decade ago. The retailer feels forced to react: for example, the chain has launched a low priced “Exclusively at Tesco” range and even started its own discount chain under the name Jack’s. This supposedly firm response to the success of the price-fighters, so far did not enjoy much success.

Observers are concerned about Tesco’s initiative: they fear that this is the start of a new price war on the British market. Analysts at Barclays point out that it is not easy to compare prices with Aldi, because that chain sells mostly private label products. As a result, there can always be a discussion as to whether the quality is equivalent. Moreover, this price investment can put further pressure on Tesco’s margin. And finally, the question can also be asked whether it is wise to advertise in your own stores for your major competitor, and implicitly say that the rest of your prices are higher than theirs…