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Last Updated: Monday, 4 April, 2005, 13:52 GMT 14:52 UK
Price cuts raise retail pressure
Tesco trolleys
The cuts are set to put renewed pressure on rivals
The UK's two largest supermarket chains have launched new price-cutting drives, putting further pressure on rivals and stores on the High Street.

Tesco plans to reduce prices by 67m ($125m) on 300 items, with a focus on products in its low-cost Value brand.

Asda says it will cut more than 100m from a range of food and non-food lines including orange juice and T-shirts.

Increased competition from supermarkets has been cited by a number of retailers as a reason for disappointing sales.

Piling on the pressure

The latest announcements see market leader Tesco, with a 29% market share, tackle Asda's claim to be the UK's cheapest food retailer.

The move will also pile pressure on the other main supermarket chains.

Sainsbury's said recently that its sales had started to show an improvement after it introduced a round of price reductions. Analysts are waiting to see how it responds to the latest announcements.

It's a continuation of the price skirmishes that have been going on for some time and will put more pressure on the same players
Richard Ratner, Retail analyst

Meanwhile, Morrisons - which has struggled to merge the Safeway business into its own since it bought the group last year - noted "competitive market conditions" when it issued a profit warning and reported a fall in annual profits last month.

The price-cutting by the two market leaders has also has an impact on sales at other low-cost food retailers such as Somerfield.

On the High Street, the likes of Marks & Spencer, Boots and Woolworths have also been forced to respond to Tesco and Asda's expansion into non-food areas.

Richard Ratner, retail analyst, at Seymour Pierce described the cuts as "more of the same".

"It's a continuation of the price skirmishes that have been going on for some time and will put more pressure on the same players," he said.

Supplier concerns

The moves have also lead to renewed concern over the potential impact on food producers and suppliers.

"The result will be a major price war," Robin Tapper, the National Farmers' Union head of Food and Farming told the BBC's Working Lunch programme.

"It will be bad news for suppliers in terms that the price cuts will inevitably trickle downwards and basically our members will be stuck between a rock and a hard place."




SEE ALSO:
Improved supply lifts Sainsbury's
24 Mar 05 |  Business
Asda appoints new chief executive
18 Mar 05 |  Business
Morrisons issues profit warning
17 Mar 05 |  Business
Bumper Christmas sales at Tesco
18 Jan 05 |  Business
Tesco battling Asda in price war
21 Dec 04 |  Business
M&S loses clothes crown to Asda
23 Aug 04 |  Business


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