Asda is planning drastic measures to cope with soaring food costs, which some predict will see prices rise as much as 30 per cent by Christmas.

While other retailers have been forced to put up prices in store as prices surge on global markets for various food products, Asda is reportedly planning a high-risk strategy known as ‘agriflation’, which will see it absorb most price increases and massively impact on its profit margins.

Sources at the chain admit the company is concerned shoppers will defect to cheaper alternative rivals such as Aldi, Lidl and Netto if they have to incur too much of the extra costs at Asda.

One insider said: “Say the average Asda shopper spends £60 a month with us - if all the extra costs are passed on, they will be looking at spending an extra £15 a week, which will hugely affect Christmas spending, holiday plans and much more, for many people.”

Analysts believe the Wal-Mart-owned chain to be in a more vulnerable position than Tesco and Sainsbury’s, because the public see it as the cheapest of the three and its shoppers are more likely to trade down.

So far, Asda has pushed up prices broadly in line with its peers, but one supplier, who told national press he wished to remain nameless, said that the retailer has already started the campaign to take the price rises out of its own pocket. He explained the retailer had agreed to price rises of 10 to 12 per cent on product lines from his company which started hitting the shelves over the weekend. But the increase has not been passed on to shoppers this week. He said he expected to have pushed through a total increase of 25 per cent by the end of the year.

Seymour Pierce analyst Richard Ratner said: “This seems to me a very high-risk strategy. If Asda does this, all the other supermarkets will simply follow suit and we’ll get another price war.” He added that in most cases, it was the food suppliers’ margins that were being hit, and that Lidl and its peers faced the same pricing pressures as Asda.

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