Asda, the British grocer owned by Walmart, is piling the pressure on Tesco and their other main rivals with £200 million worth of price cuts planned for 2014.
Asda, which vies with J Sainsbury to be Britain’s second-biggest supermarket chain by market share, has spent £25 million cutting prices in the run-up to Christmas this year already.
In the first quarter of next year alone, it will spend £50 million cutting prices on own-label and branded food, according to the Financial Times.
The aggressive price cutting strategy comes as part of the retailer's announcement earlier this year that it will cut prices by £1 billion over the next five years. Asda hopes that these cuts will mean it can undercut rivals and at the same time bring its prices closer to those of Aldi and Lidl.
Cuts of £1 billion would represent almost 5% over its total sales figure for 2012.
The plans come amid recent talk that Tesco could be forced to sacrifice some margin in the UK to lower its prices in an effort to restore sales growth. With Asda ratcheting up the pressure with a fresh round of price cuts, one industry executive is quoted by the FT as saying the move “is going to be painful for a lot of people”.
Meanwhile, internal figures seen by the FT are said to show that Asda is on track to increase profits by 1.6% to £316 million in its final quarter, which would trigger staff bonus payouts.
© 2013 - European Supermarket Magazine by Enda Dowling
