Supermarkets Launch Price War Fuelled By Economy Fears 20per Cent Rise in Sales of Asda Budget Goods

By DOUGLAS HAMILTON

MAJOR supermarkets announced a new round of price cuts yesterday as Asda said sales of its budget ranges jumped by 20per cent.

The rise suggests shoppers are putting more bargainpriced goods in their trolleys as the economic downturn tightens its grip on the country.

Both Asda and Tesco promised lower prices over coming days to outflank their rivals.

Asda unveiled a range of goods, including two pints of milk, for sale over the weekend at 50p. The retailer said customers would be able to buy milk at its cheapest price since 2001 following increases of about 21per cent in the last year. Other 50p products include bread and butter, eggs, meat and vegetables.

The price cuts are in effect from today until Sunday. Suppliers would not be affected by the reductions, Asda said.

Asda, which is the UK’s second-biggest supermarket chain and part of the USbased Wal-Mart group, also said sales of its Smartprice and Extra Special products helped lift underlying sales growth during the second quarter to 6per cent, compared with 5per cent for the first quarter.

Surveys have shown the lower-priced segment of the supermarket sector has attracted more customers in recent months as households look to offset rising fuel, energy and food costs. Britons are laden with an estimated GBP1.4 trillion of debt.

Latest figures from TNS Worldpanel showed Asda’s sales grew by 9per cent during the 12 weeks to July 13. No frills rivals such as Aldi and Lidl performed even better, enjoying year-on-year growth of 19.5per cent and 14.3per cent respectively. Tesco, meanwhile, will cut the cost of 18,000 products in its biggest weekly promotion yet, it announced yesterday. The retailer said it was reducing the price of a range of everyday goods on promotion, from bread, sausages and pizzas to Back to School uniforms and homewares.

Tesco said the move meant it had cut GBP620m from prices since January. Tesco commercial director Richard Brasher said: “Rising costs continue to hit customers hard Despite clear inflation in some food products we have worked hard to cut our prices week after week and negotiated some fantastic deals with our suppliers to bring shopping bills down.”

Asda’s chief financial officer Judith McKenna said the retailer’s low prices were “undoubtedly more important than ever”. She said yesterday’s sales figures demonstrate that Asda’s strategy is continuing to deliver results.

“However, we won’t be complacent. We’ve got tough conditions ahead of us and must continue to focus on driving costs out of our business so that we can continue to offer customers value for their hard-earned money.”

Food inflation hit 13.7per cent last month, official data showed this week, with more expensive meat, milk and bread the main drivers. The average grocery bill for a typical family has climbed by more than one-quarter to GBP127 since last summer, according to price comparison website Mysupermarket. co. uk.

Asda’s figures contributed to a good second-quarter performance from its parent group Wal-Mart Stores, the world’s biggest retailer.

Wal-Mart saw profits increase 17per cent to Dollar3.45bn (GBP1.85bn) in the three months to the end of June.

Originally published by Newsquest Media Group.

(c) 2008 Herald, The; Glasgow (UK). Provided by ProQuest LLC. All rights Reserved.