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Friday, October 1, 1999 Published at 10:58 GMT 11:58 UK

Business: The Company File

Fresh stores war erupts

Regular price-cutting could leave shoppers confused

Supermarket rivals Tesco and Sainsbury have each announced swingeing new rounds of price cuts in a fresh battle for customers.

Sainsbury pledged to offer the lowest prices on 1,500 brands, in a move that will cost it £20m.

But Tesco immediately hit back, promising to shave up to 20% off more than 1,000 lines from Monday. Tesco chiefs say these cuts will cost £250m.

[ image: Sainsbury says it will be cheapest on 1,500 goods]
Sainsbury says it will be cheapest on 1,500 goods
The new outbreak of price-cutting is the latest move in a fierce supermarket war following the takeover of Asda by American low-cost giant Wal-Mart.

Asda pledged to cut 10,000 prices by the end of next year in an aggressive US-style campaign.

It also comes as store giants are facing an inquiry by the Competition Commission into claims that customers are being ripped off.

And the government has pledged to crack down on what it calls "rip-off Britain".

It plans to publish a price comparison survey in January between Britain, other European countries and the US.

Already this year, Tesco has invested £130m in price cuts.

Now, some products will be discounted by up to 20%, but the average cut will be 10%. Everyday items such as Kellogg's Cornflakes and Heinz baked beans will be involved.

Tesco says it also affects non-foods, such as 50% off blank videos.

'Retail revolution'

Marketing director Tim Mason said: "The Tesco price cuts we are unveiling today will rock UK shopping baskets in a way we have never seen before, it's a retail revolution."

Sainsbury's new price strategy will include 100 top brands, but a spokeswoman said they could not put a percentage figure on the cuts.

She said: "We're not doing it that way. We're matching our major competitors."

From next week, Sainsbury shoppers will receive a "personal letter" by chief executive Dino Adriano when they enter the stores, acknowledging that it is getting harder for shoppers to know what to believe about supermarket prices.

But he adds that their old promise on competitive prices remains true.

An Asda spokesman said: "We have cut some 3,000 prices already and have plans to cut 10,000 by the end of next year. Our shoppers know that we always lead on price."

A retail analyst warned stiff competition could lead to a concentration of retail power with a few massive chains.

Mike Godliman, of research group Verdict, said: "In the short-term consumers will get the benefit of actually saving money but in the longer term two or three really big players could be left and that will mean less choice overall."

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