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STORE WARS Price-cut bonanza for shoppers may kill off supermarket chain SHOPPERS were last night poised to reap huge savings as rival supermarkets slashed millions of pounds off prices. Retail analysts predicted that at least one of the country's most famous high street names will go to the wall because of the intense competition. Within hours of each other, Sainsbury's and Tesco both cut prices on their best-selling lines, with thousands of other items set to follow suit. Experts said it marks the end of the "phoney war" which began when Asda pledged American-style cost-cutting after being bought by US store giant Wal-Mart earlier this year. But in the long term it could mean British supermarkets being snapped up by predatory foreign chains already casting envious eyes over the UK market. Dutch giant Ahold, huge French retailer Carrefour and the other American big-hitter K-Mart are all being tipped as potential players. Tim Palmer, of the industry magazine The Grocer said: "The takeover of Asda has proved that no retailer is safe. It is just a question of who can stay the distance. "The business now is all about global retailing and smaller companies will find it hard to compete." Market analyst Mike Godliman of research group Verdict said: "Asda and Tesco are going to be fighting it out pretty strongly over the next few months and even the next couple of years. "How Sainsbury's, Safeway and Somerfield are going to be able to survive we will have to wait and see." Yesterday's dramatic shift in the store wars began with a �20million pledge from Sainsbury's to guarantee the lowest prices on 1,500 items - including the nation's Top 100 lines covering branded goods such as Heinz baked beans, Kellogg's cornflakes and Persil washing powder. Tesco followed by promising to invest �250million with price cuts of up to 20 per cent on more than 1,000 products.The move follows �130 million already spent on discounting so far this year. Asda set the ball rolling in the summer by slashing the price of 3,000 items - to rise to 4,000 by Christmas and covering 10,000 by the end of next year - in its Rollback campaign. Reports suggest that the current fierce discounting saves the average family of four about �10 on a �72 shopping bill. Phil Evans, who represents the Consumers' Association, said: "It now looks like the price war we have all been promised has finally broken out. "Initially, the supermarkets were discounting a hundred or so products here and there, which from a range of 25,000 was no big shakes. "But now we are hearing the retailers talk of cutting a third of their entire lines - and that is real discounting." The move is bound to raise suspicion - supported by some independent research - that supermarkets have been "ripping off" customers with inflated prices. In January the Government is to publish a price survey comparing Britain with several European countries and the United States. The Competition Commission, which is already investigating the issue, is expected to report in March. Mr Godliman said that tackling Asda - which is now backed by the world's biggest grocer - on price alone is "always going to be a losing strategy" for some chains. Instead, a different sales approach such as convenience, quality and choice would probably keep customers coming through the doors. It has already been tried successfully by Waitrose. In a "personal letter" to be handed to millions of shoppers passing through checkouts this week, Sainsbury's chief executive Dino Adriano tells customers: "We know that with food it is not just what you pay that is important, it is what you get for your money. "So at Sainsbury's we will never compromise on quality." The letter, which also appears as a full page advertisement in national newspapers, adds: "It is getting harder for shoppers to know what to believe about supermarket prices. "At Sainsbury's we made a promise to our customers years ago: to provide the highest quality food at the most competitive prices. That promise remains true today." However, a spokesman for Asda, which employs 80,000 staff at 230 stores, claimed that the company had blazed a trail for the competition to follow. "We are committed to having the lowest prices in the world," said the spokesman. "We know that when we reduce prices we sell more products, it's as simple as that. "Even for the suppliers, who we expect to be competitive, that is good news because they are selling more to us. "The rest of the retail industry has finally caught on, but they have a long way to go to catch us." l Figures from Verdict for 1998 show that Tesco held 17.3 per cent of the UK grocery market, Sainsbury's (including Savacentres) had 13.3 per cent, Asda 8.8 per cent, Safeway 8 per cent, the Co-op 5.2 per cent and Somerfield 3.5 per cent. BILL FOR A BASKET The price war has already cut the cost of the average shopping trolley by 8.55 per cent since April. A weekly survey by The Grocer magazine lists the cost of 33 popular items at stores across the country. This time last year, it cost �39.42 to fill a Tesco trolley against �39.81 at Sainsbury's. Prices peaked in spring at �41.38 before plunging rapidly as discounting took hold. By July, Tesco was still the cheapest at �38.84. Yesterday, The Express went shopping for the same 33 items and again found Tesco came out on top at �38.04, compared with Sainsbury's �39.01. On Monday, when Tesco's new prices come into force, the total will drop even further to �37.84 - a drop of �3.54 on six months ago. |