Further price cuts from Laurus

Related tags Redox Albert heijn Laurus

Laurus, the Dutch retail group, has made its third set of price
cuts in two weeks, with a further 230 items at the Edah chain
benefiting from the reduction. But the company faces a difficult
few months, trying to find the right balance between eroding its
margins and increasing its sales.

The sluggishness of the Dutch economy is taking its toll on retailers there, with most of the major supermarket chains cutting prices substantially over the last few weeks.

Albert Heijn, the flagship banner of the Ahold group, was the first to reduce its prices earlier this month, slashing up to 30 per cent off some items in an attempt to win back former customers who voted with feet and took their custom to cheaper stores.

Ahold's move was followed by a similar one from Laurus, the supermarket group in which French group Casino has a stake, which cut the price of over 1,000 products at its Edah, Konmar and Super De Boer units.

But unlike Ahold, Laurus has continued with a wave of price reductions, with two different announcements this week. On Wednesday, the company introduced permanent price cuts on 100 products at Super De Boer and Konmar in a bid to "reinforce the market position of both formats"​ while today some 230 products at the Edah chain were also reduced in price.

"Since August 2003 Edah has been working on structural price reductions of its A-brand assortment. Since then, there has already been a price reduction on 450 products and the entire meat assortment,"​ the company said in a statement.

Edah also announced a new campaign to expand sales of its own label products. Edah currently has 1,822 own label products, which on average are 30 per cent cheaper than the comparable A-brand, the company claimed.

If Ahold is experiencing the year from hell in 2003 with revelations of accounting fraud and billion-euro losses, Laurus is finally beginning to see light at the end of the tunnel after its own much-publicised troubles over the last few years.

Bolstered by the purchase of a 40 per cent stake by Casino in 2002 and having offloaded its troublesome Spanish unit, the number two Dutch retail group is able to concentrate its efforts on improving its core domestic business.

And there is much work to be done here, with disposals there significantly reducing the company's market share and increasing its cost base as it found itself with a logistics network far larger than that necessary for its reduced store portfolio.

The company has taken measures to redress the situation, reducing staff numbers and closing warehouse facilities, but it still has some way to go before it is back to generating growth across all its fascias.

The price cuts should help increase customer footfall in the company's stores, but will inevitably have an adverse effect on margins. While this is clearly seen as acceptable - to say nothing of necessary - in the short term, it is not a situation which can last forever, and even if it can see the light, it is still likely to be some time before Laurus finally emerges from the tunnel.

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