On top of a new wave of economic uncertainty, the past month has brought a raft of new value initiatives from the UK's leading grocery retailers, including Tesco's new discounter range. What are the key developments underway and what are the implications for the sector?
 

Initiatives across the sector

Tesco's new discounter range may have been the highest profile launch over recent weeks, but it's not the only initiative under way. Asda, the Co-operative Group and Morrisons have all unveiled new initiatives to bolster their value credentials.
 

"Britain's Biggest Discounter"

The new range marks one of the biggest launches for Tesco in recent times. The new positioning marks a move beyond the traditional good/better/best structure. Pricing of the 400 new lines has clearly been influenced by Aldi, currently leading the way in terms of sector growth, with direct price comparisons used in-store and in marketing. The new range comprises 34 sub brands, amongst which Trattoria Verdi, Daisy, Oak Farm, Market Value and The Curry Leaf rank among the most prominent. It forms part of a broader initiative designed to position Tesco as ‘Britain's Biggest Discounter’, with the full discounter range covering over 1,100 lines. Crucially, the discount ranges have been introduced to over 1,500 outlets including Tesco Express convenience stores.
 

	New value initiatives have been prevalent in 2008

Asda's ‘smart’ approach

In the same week as the Tesco move, Asda announced an initiative to bolster its own value range, cutting the price of every single Smart Price product as part of a broader initiative to reduce the price of 5,000 lines across both own label and branded lines. Smart Price has been a strong area of growth for the retailer so far in 2008, delivering a 20% uplift in the second quarter of the year for Asda.
 

Morrisons delivering more ‘Value’

Morrisons' Value range has been a key area of recent development for the business, with range expansion following its relaunch in the first half of the current year. Total SKU count now stands at over 300 lines, with plans to increase it by 50% in the second half of the year. And this forms part of a broader value-focused initiative that included 4,000 price reductions in September, whilst the retailer continued with its highly potent promotional programme.
 

Sainsbury's reaffirms its credentials

Also during September, Sainsbury's has been shouting about its own value-focused initiatives, including ‘switch-and-save’ and further development of the ‘feed your family for a fiver’ initiative. Strong price reductions on produce have also been a feature in-store over recent weeks. This builds on the recent success of Sainsbury’s 550-strong Basics range following its 2007 relaunch.
 

The Co-operative offers ‘a great deal locally’

The Co-operative has also been keen to better demonstrate its value credentials, but has been careful to develop an approach that is aligned with its core strengths and values. The launch of ‘a great deal locally’, a new campaign introduced into stores in late September, certainly delivers on these counts. In the Co-operative Group's recent results, the retailer announced a commitment to expand its existing ‘everyday’ value offer from its current 50-strong range. Assuming the successful completion of the deal, it will benefit from the significant work Somerfield has put into developing its own ‘Simply Value’ range.
 

Demonstrating ‘Wise Buys’….

M&S has recognised the importance of talking more about price through its ‘Wise Buys’ initiative in-store. This forms part of a broader set of initiatives at M&S designed to improve its value credentials in a challenging market, while Waitrose too is doing more in this area.
 

An evolving shopper

Key trends that we’ve seen coming through so far in 2008 have been the emergence of a smarter shopper, more prepared to shop around, and more promotionally driven as they seek to extract the best possible value from their spend.

While grocery inflation appears to have peaked, the prevailing economic uncertainty looks set to continue. What this means is that looking to the next 12 months, there is little to suggest any let up in this value focus.

Clearly value is only part of the picture, with continuing growth opportunities across different parts of the market. And indeed an ability to attract customers based on a broader set of credentials than just value will be key to prosperity in the longer term. In the run up to Christmas it will be a combination of value and broader attributes that will be the key to success. However, delivering on value credentials appears set to remain as crucial as ever in 2009.

More information:

The Evolution Of Discount Retailing Discounting is a hot topic for a growing number of suppliers and retailers. This new report shows how discount retailers are changing and the opportunities and challenges this brings.

	UK Grocery Retail Outlook UK Grocery Retail Outlook - an in-depth guide to the UK Grocery retailing sector, with grocery market size & structure and emerging grocery sector trends.

	Discount and Value Retailing Seminar 23 October 2008 This one-day seminar is aimed at suppliers operating in, or wishing to enter the discount channel. By attending you'll understand the challenges and opportunities of discounting, get an overview of the current UK discount grocery market, discover the latest trends in global discount retailing and learn how consumers shop the sector.

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Gavin Rothwell is a Senior Business Analyst at IGD. Much of his work focuses on the major UK grocery multiples, tracking the strategy of each of the leading players, and he is the lead author of IGD’s UK Grocery Retail Outlook report. His work at IGD has crossed a wide range of UK and international themes, including leading IGD’s High Street value retailing stream and playing a key part in IGD’s UK and Global discount research programmes.