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Wednesday, September 22, 1999 Published at 05:08 GMT 06:08 UK

Business: Your Money

On the price war's front line

The bigger stores are prepared to make losses on several lines

It promises to be the mother of all supermarket battles - a shoot-out with pricing guns.

As the UK's big supermarkets battle it out for supremacy, the battle lines are drawn at the check-outs.

Incentives such as store cards and special offers have been pushed to one side as the major chains slug it out in a straight price-cutting scrap.

It promises to be a war of attrition, with the bigger stores apparently ready to make losses on many lines in order to win the big prize of being the UK's leading supermarket chain.

Over the coming weeks, BBC News Online will bring reports from the front line - regularly checking prices on a "shopping basket" of basic goods to see just how the supermarkets are faring, and what it means to the customer.

The honour of being the UK's biggest supermarket chain currently rests with Tesco, who overtook Sainsbury's two years ago.

But now Asda have the Americans on their side - and the battle looks set to escalate.

Asda has been bought by US retail giant Wal-Mart, a chain whose pile-'em-high-sell-'em-cheap philosophy and aggressive expansionism has seen it rise from a mom-and-pop store in rural Arkansas to America's biggest supermarket in less than 40 years.

Asda has promised to cut prices on hundreds of products to bring them into line with Wal-Mart over the next 18 months.

Tesco has responded by announcing "the biggest round of price-cutting Britain has ever seen".

Bumper profits

Matching US prices will not be easy. A report commissioned by the Office for Fair Trading last year said the major UK supermarkets' profit margins were three times those of their counterparts in the US and in Europe.

But with a Wal-Mart backed Asda seemingly determined to use all its financial muscle to push to the top, its rivals can't afford not to take it on.

Tesco - which has just announced profits of £400m - is big enough to slug it out with Asda.

The other pair who make up the UK's "big-four" supermarkets - Sainsbury's and Safeway - also have the resources for a fight.

But a protracted battle could prove costly for all these supermarkets - and potentially fatal for some of the UK's smaller chains.

However, it does promise to bring benefits - at least in the short term - to shoppers.

The supermarket battle will be won in the hearts and minds - and crucially, the pockets - of customers.

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