Shots fired in UK supermarket price wars

aldi-1Asda, the British supermarket arm of US retailer Wal-Mart, will spend a further STG500 million pounds ($A1.04 billion) cutting prices, firing 2016’s first shot in a price war that has raged for two years.

All of Britain’s “big four” supermarket chains, market leader Tesco, Sainsbury’s, Asda and Morrisons,  have been cutting prices in an attempt to turn the tide after losing customers to discounters Aldi and Lidl.

Asda, which had been the first to move, said the STG500 million is in addition to its previously announced price cuts. In November 2013 it said it would spend STG1 billion pounds on cuts over five years.

“We must take radical action to win back our customers,” chief executive, Andy Clarke, said, pointing to a lack of growth in the market and the rise of the discounters.

“We expect that 2016 will be another year of intense pressure at a macro-economic level in addition to sales remaining under strain from price deflation, a continued competitive background throughout the sector and radically changing customer shopping habits.”

Asda was the worst performer by sales among Britain’s leading supermarkets in 2015, with management choosing to protect profit margins rather than chase sales.

The company reported like-for-like sales down 4.5 per cent year on year in its third quarter after a record 4.7 per cent decline in the previous three months. It is due to provide an update on fourth-quarter trading on February 18.

Tesco, Sainsbury’s and Morrisons will all report on Christmas trading this week.

Asda on Sunday also said it would soon become a member of European Marketing Distribution (EMD), a buying alliance with combined turnover of 178 billion euros ($A279.06 billion).

Reuters

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