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The BBC's Nicola Carslaw
"There's only limited evidence of excessive profits"
 real 28k

Monday, 21 February, 2000, 14:16 GMT
Supermarket price war intensifies

supermarket checkout
The price war is squeezing smaller supermarkets

UK food bills are set to fall further as leading supermarkets begin a new price war.

Asda and Tesco have both announced price cuts on a range of goods, saving shoppers an average 15 a week.

Asda said it would make 400 lines cheaper and planned to reduce about 6,000 products later this year.

The store is now owned by Wal-Mart, the US retailer noted for its aggressive approach to price-cutting.

Chief executive Allan Leighton commented: "Asda's on the up, because our prices are coming down. Customers know there's only one store leading on price."

Asda supermarket Asda says it's making 400 lines cheaper
But rival Tesco, the market leader, said it would knock 66m off its food range, reducing the prices of about 1,000 items by an average of 9% - some would fall by as much as 20%.

Tesco's David Sawday countered: "The fact is that in the last 18 months, we have put in 380m of price cuts and Asda have invested nowhere near that amount."

"Asda keep announcing what they are planning to do, whereas we announce what we are actually doing."

The current focus on prices began after Wal-Mart's 6.7bn takeover of Asda in June last year.

Profits hit

But it is already having an effect, with profits being hit at Safeway and Sainsbury's, the other major players.

Safeway said it would wait to see how the latest price war developed.

"We'll see what actually happens, but we will continue to ensure our prices remain highly competitive," said a spokeswoman.

"Our approach is more to offer 'deep cut' special offers targetting particular groups."

Sainsbury's, which has invested 200m to guarantee low prices on 1,500 items, will monitor the situation.

Earlier this month, an interim report into supermarket prices found there was some evidence that supermarkets might be abusing their monopoly power.

But the Competition Commission said food was getting cheaper in real terms, although it felt price competition was based on just a small number of items.

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See also:
01 Feb 00 |  Business
Supermarkets cleared over prices
05 Oct 99 |  Your Money
Q&A: Supermarket price wars
20 Aug 99 |  The Company File
More competition in store
27 Sep 99 |  The Company File
Asda steps up price war

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