Supermarket price war declared
June, 30, 2008
The battle lines have been well and truly drawn as supermarkets begin to slash the cost of their groceries in an attempt to attract customers.
Indeed, both Tesco and Asda have taken out adverts in the national press in recent days where they have promised to lower prices to beat their opponents.
The Press Association notes that the first shots were fired when Asda revealed a range of everyday products - such as bananas, bread, eggs and sausages - for just 50p over the weekend, in moves aimed at tackling the ongoing effects of the credit crunch.
Not to be outdone, Tesco returned fire by declaring a number of "inflation-busting prices" with cuts of up to 50 per cent on approximately 5,000 of its items.
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A spokesperson for the supermarket chain told the news agency that another 3,000 items would be reduced in cost at some point this week.
Both groups gave similar statements to the press, with an Asda representative stating: "Times are getting tough and people are feeling the pinch so we have reduced the price of these ten staple items over the weekend.
"It is going back to the basics like bread, eggs and butter and fruit and veg as well."
Meanwhile, a Tesco spokesperson said: "We know times are tough and customers are tightening their belts so we will be keeping an eye on prices all year."
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Not to be outdone, Sainsbury's has responded with a number of temporary price cuts on a range of summer groceries, such as strawberries.
It appears that the winners of the war, in the short term at least, are Britain's discount supermarkets, with the Times recently citing figures from Aldi, Lidl and Iceland and noting that they have all enjoyed significant sales growth over the past month.
Lidl enjoyed a rise of 14.9 per cent in terms of sales, while Iceland has experienced a 15.2 per cent increase.
Finally, Aldi posted a 20 per cent boost in terms of its business, figures from TNA suggested.
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The BBC also notes that Farm Foods enjoyed a year-on-year price rise of 13 per cent in the three month period ending at the middle of June this year.
Indeed, analyst Henk Potts from Barclays Wealth told BBC Radio 5 Live's Breakfast programme that the price cuts were responding to a shift by consumers from top-end stores to cheaper alternatives.
"If consumers have got less money in their pockets, they spend more money in discount supermarket groups. There is pressure on the major supermarket groups to compete with that," he said.
Richard Hyman, a strategic advisor for Deloitte, told the publication: "Clearly, value has gone up the agenda for large numbers of consumers, particularly those on lower incomes."
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News agency CNN notes that Credit Suisse believes customers have been moving towards value-based foodstuffs has been gaining momentum in the UK over the last couple of weeks, with value brands and discounted products gaining a market share at the expense of premium-cost fare.
The BBC concludes by noting that when the consumer prices index rose by 3.3 per cent in May, the Office of National Statistics said eggs, cheese and milk had increased by nearly 17 per cent over the course of the year.
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