Waitrose feels the squeeze

AKILO of Scotch ribeye steak at Aldi costs £13.61. At Waitrose, the same amount of British ribeye is £20.99. So which one do you buy? For a discerning shopper with mouths to feed, it’s a nobrainer.

As Aldi’s phenomenal growth has shown, British shoppers are flocking to the German discounter at the rate of knots.

Aldi, with its fellow discounter Lidl, shared the top spot as Britain’s fastestgrowing supermarkets at the end of the year, both growing sales by nearly 17pc.

This took Aldi’s slice of the grocery market to 7pc, with sales shooting past £10bn for the first time. Lidl was not far behind with 5pc. Their combined share grew 80pc over the previous four years.

Our taste for a bargain has cost Waitrose dear. Results from the John Lewis Partnership yesterday showed pretax profits for the John Lewis stores and Waitrose fell more than a fifth, to £289.2m. The downturn was due almost entirely to lower profit margins at Waitrose, a dip blamed on the weaker pound but also competitive pricing.

Before bonus, tax and other oneoffs, operating profits fell nearly a third to £172m. That’s serious, and reveals for the first time just how Waitrose has managed to get away with such fat margins for so long.

For years its middleclass Manchegoeating shoppers have been happy to pay for the privilege of shopping there. Its skyhigh prices even became a bit of a laugh, a badge of honour for some diehards. It’s common knowledge the prices of some brands are up to 20pc higher, and more on fresh foods.

Not any more. Everybody is costconscious today, and it’s the pricecutting by German discounters which has woken up the public to high prices. Lidl has already knocked Waitrose down to eighth position in the league table. Waitrose says it will climb back up the ranks by trimming expansion, axing jobs and closing stores.

At the same time, it is still investing and improving stores, has developed 2,500 new food products and is introducing all sorts of fancy taster sessions.

Posh cheese jokes apart, the Waitrose brand owes its reputation to being a luxury supermarket for foodies, and has done it exceptionally well.

The paradox is that it also clings to the John Lewis philosophy of value for money and pricematching against rivals. Can it hold both candles at the same time?

Retail guru Nick Bubb says chasing both ambitions is unsustainable.

With squeezed incomes and higher food inflation, shoppers have become magpies in search of the best deals.

With the snobbery of where or how you shop long gone, customers are neither loyal nor tribal about a brand.

The discounters have forced down margins with their own brands, and it’s a far more dynamic marketplace. Look at how the overall market is changing.

Today, the big four – Tesco, Sainsbury’s, Asda and Morrisons – account for just 69.3pc of the UK market, from 76.3pc five years ago. That fragmentation is set to continue. Aldi plans to double its stores to 1,000, and Lidl is opening another 50 or so a year. They are not going to go away.

If Waitrose is to survive, it’s going to have to chop heavily into those margins, which have been too fat for years.

By the way, Aldi’s ribeye steaks are delicious – as long as they stay at these prices.

Who’s to Judge?

THE voluntary departure of Lady Barbara Judge as chairman of the Institute of Directors (IoD) is a firecracker of a story, one fuelled by vicious briefings by her enemies.

Choosing International Women’s Day to leak the tale that the Americantrained lawyer faces 41 allegations of bad behaviour, such as sexist and racist misconduct, was certainly not sisterly.

Many of her colleagues are fighting back, claiming the charges are ‘fatally flawed’ and against the principles of natural justice.

Judge, whom I once described as an ‘elegant mix of Amish schoolmarm and coquettish ballet mistress’ for her trademark black suits, ruffled white shirts and neat French bun, is no shrinking violet.

As she explained, the way she dressed was her armour to do battle in a man’s world.

The IoD is going to need more than governance skills to stop this turning into allout war.