DairyCo

Industry is braced for major price-cutting initiative by Tesco

Published 22 September 11

It has been widely reported that Tesco, the UK's largest supermarket is preparing to launch a major pricing offensive next week to boost its ailing UK business.  The initiative, which is anticipated to be announced next Monday, is expected to involve lowering prices with fewer multi-buy promotions in a bid to appeal to cash-strapped customers. The supermarket giant, which will release its first-half results at the start of next month, is believed to be concerned at recent losses in market share to rivals including the resurgent discounters Aldi and Lidl. Such an extensive price-cutting initiative could have serious implications for the supermarket sector as the focus turns to wooing cash-strapped customers and could be heavily felt across the Industry.

Analysts claim that the bigest losers from any major initiative launched by Tesco would be Ocado, which has a promise to price match against Tesco on some 7,000 brands, and Sainsbury's, which is testing out a similar price-match scheme in Northern Ireland.  The impacts of such a move by Tesco are predicted to be wide-ranging and heavily felt across the industry.  News of the anticpated move by Tesco sent shares tumbling - Ocado fell to a new low of 100p yesterday before closing down 11% at 102.5p.  Tesco shares fell by 2% to 364p, while Sainsbury's also slipped 2% to 274.5p.

 For further information: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8780284/Tesco-to-start-supermarket-price-war.html