We may be slashing prices… but Waitrose will always be a cut above

Waitrose has long been a bastion of Britain’s middle classes, who brandish its shopping bags like a badge of honour. So it must be hard times indeed when boss James Bailey has to cut prices to tempt shoppers through the door.

‘It’s really hard to make money at the moment,’ he says, pointing to the uninspiring profit growth at rivals as evidence.

But he admits: ‘We are behind the market, we have been for the past nine months.’

Waitrose’s share of the grocery market moves in tandem with consumer confidence, he says, ‘and last year saw the lowest consumer confidence levels we’ve ever seen’.

Waitrose, regarded by most as a cut above on quality, but also on price, is especially feeling the pressure as high energy bills and mortgage costs mean less for life’s little luxuries.

Bailey says his supermarket must tough it out – and wait for a lift that can only come from a more buoyant economy.

But he’s not sitting idly by. He has this month launched the first salvo of a record £100 million price-cutting campaign covering a third of Waitrose’s 900-strong Essentials range.

The price of Essentials sausages has fallen from £2.65 to £2; galia melons from £2.60 to £2; and a 160g block of Mature British Cheddar from £2.10 to £1.50.

He says the competitively priced range of everyday items is already popular with regulars. Essentials sales rose 15 per cent last year as shoppers sought to economise. The range accounts for four out of ten products that Waitrose sells. Bailey says ‘anecdotally’ that customers who defected to cheaper chains are already waking up to the newly trimmed prices.

‘Customers don’t have to compromise on the standards they expect from us when they are buying our Essentials range – and actually the prices are fantastic,’ he says. ‘It’s kind of a hidden gem – although we keep trying to unhide it. Things like the pork sausages – they’re from outdoor bred, British high welfare pigs. That commitment applies to all our pork ranges.’

He describes Sainsbury’s top end Taste The Difference range as its ‘equivalent’, but doesn’t resist the urge to take a swipe at a rival, adding: ‘Their other pork, bacon and sausages don’t have that standard. So what we sell as an entry price, they sell as the best you can get.’

He suggests some competitors, he describes them as ‘the traditional big four’ – Tesco, Sainsbury’s, Asda and Morrisons – are quietly making compromises to spruce up profit margins or keep prices low.

He says: ‘Inevitably, if big retailers look at the cost of goods and everything else, there is an ongoing temptation to take some of that quality out if you need to maintain returns to shareholders and keep up with your price message.’

He insists he will not ditch fresh produce counters, as Sainsbury’s and Tesco have done, saying: ‘Soon there will be a moment when, if you love food and care where it comes from, you are running out of places where you can get that. All of which is an opportunity for us.’

Compromising on quality, he says, ‘is just not how Waitrose was built. It’s not in our DNA’.

Bailey, who arrived from Sainsbury’s three years ago, is disarmingly self-effacing and unusually candid for a boss of a big grocer. Retail is ‘non-stop’ he says, adding: ‘There’s no shortage of things to talk about or worry about or change. Half the fight is stopping yourself from doing this seven days a week. You’ve got to remember you’ve got a great team, they know what they’re doing. They don’t need to know whether I think watermelons are too expensive.

‘Contributions like that are just going to be a brick in a pond.’

Waitrose and its sister chain John Lewis are owned by a partnership which has been losing money for more than two years. Waitrose’s performance is especially troubling as it has historically provided a financial backbone for the group as John Lewis department stores struggle on a crumbling high street. Financial results due next month will reveal the extent to which Bailey has reversed the trend. Is he optimistic about the year ahead?

‘If we start to see consumer confidence come back and things this year don’t turn out to be quite as bad as people feared,’ then yes, he says. ‘We’re starting to see green shoots a bit. It’s our job to ensure we’re in brilliant shape for that.’

He dismisses rumours last year that gaps on Waitrose shelves were any worse than at rivals. He denies they were the result of IT problems, blaming a fire at a warehouse that supplied a third of his stores.

But he says, since October, ‘availability is as good as it’s been for five years’ barring the absence of tomatoes and low supplies of other salads after frost in Europe damaged crops. Tomato shortages have reached their ‘nadir’, he suggests, and better stocks will ‘hopefully’ materialise early next month.

The shortages add heat to a simmering debate about sustainability, seasonality, food security and the cost of shipping produce around the world. Shoppers now expect full shelves all year round. He says there is no sign of consumers changing behaviour yet. But the cost of permanently filling shelves with products from around the world is only going to increase.

‘For me, the really interesting stuff is behind the scenes,’ he says of preparing for the future, describing it as ‘fixing the foundations and plumbing’ and bemoans that Waitrose has been ‘very slow to modernise’ internal processes and make use of data compared with rivals. He says: ‘Without that strategy, the margins will disappear.’

That includes a revamped forecasting system that will be fully operational next year to ensure stock arrives ‘in the right place at the right time and in the right quantities’. He wants to put John Lewis concessions in all his 330 shops. They are currently in 88. He also thinks the Little Waitrose convenience outlets, about three quarters of which are run in partnership with the likes of Shell petrol stations and garden centres, could rise by 200, doubling the current total.

‘We don’t necessarily need more big Waitrose shops. But I think we are going to put the pedal down on our own convenience estate,’ he says. But money is in short supply.

‘Because of inflation and our focus on the medium-term, we have to think carefully about where we spend and not take too many risks,’ he says. Despite the issues facing Waitrose and the sector, Bailey says ‘nothing keeps me up at night’.

He clearly relishes the brand and the food it sells. As he passes shelves of colourful dips, he urges me to ‘look at all this lovely food’, adding: ‘I love problem solving, and this job is many things, but it’s never short of problems to solve.

‘I also love the time in the shops – talking to branch teams and customers, and seeing how everything is being executed. It feels very real and tangible. I could have the worst day in the office ever and then I’ll walk out of the shop full of energy.’