The UK’s struggling number two supermarket chain, which has already reduced prices by £41m since January 1, has announced its intention to plough an additional £102 million into price-slashing in the first three months of the year.
And analysts are predicting that 2006 will see the fiercest battles to date in the war of the retail big-guns, heaping more misery on suppliers, who will largely fund the fight.
Investment bank Goldman Sachs believes the top four food retailers will put a record £1.2bn into price cuts in 2006, beating last year’s £1.1bn. In a separate report last, Goldman Sachs revealed that Asda had undercut Tesco by making the deepest price reductions in the sector this month.
The bank warned Asda that its attempts to attract more customers are likely to fail. Tesco is most likely retailer to benefit from sustained price-based competition, as it has the supply chain efficiencies and low-cost structure in place to prevent profit margins being squeezed too tightly, Goldman Sachs said.
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