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Last Updated: Sunday, 22 January 2006, 15:52 GMT
Asda cuts could spark price war
Asda trolleys
Asda hopes the cuts will lure in more shoppers
Asda has made the first move in what is expected to be a round of record supermarket price cuts this year.

The UK's second-largest supermarket chain said it would be pumping an extra 102m into slashing prices in the first three months of the year.

News of the cuts comes amid predictions that 2006 will mark the fiercest year yet in the so-called supermarket wars.

Investment bank Goldman Sachs has forecast food retailers will put a record 1.2bn into price cuts in 2006.

Last year, the top four supermarkets invested 1.1bn in cutting prices.

"We believe that 2006 will see the largest amount of price deflation for years," the report said.

Customer battle

In a separate study last week, Goldman Sachs also found that Asda had managed to undercut Tesco by making the deepest price reductions in the sector this month.

Asda has already reduced prices by 41m since the start of the year.

But while the cuts are in line with Asda's strategy to increase its competitiveness and lure in more customers, Goldman Sachs warned the move may not prove to be a success.

Tesco was most likely to benefit from any battle as it has the supply chain efficiencies and low-cost structure in place to prevent profit margins being squeezed too tightly.

News of Asda's latest price cuts came as the Wal-Mart owned chain also revealed it was moving into the wedding market.

Prospective brides will be able to pick up a wedding dress for as little as 60, or 200 for both the bride and groom, from the new George Bridal Collection.

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