There was a new entrant into the supermarket price war this week as retail tycoon Sir Philip Green unveiled his BHS Food offer in Staines, with a pledge to be ‘10% cheaper’ than Tesco.

What does it look like?

A 3,450 sq ft food hall within an existing BHS. The convenience aspects are immediately apparent, with alcohol behind the tills, newspapers and magazines, and a Nescafé self-service coffee machine at the entrance. A dedicated Pound Zone for general merchandise in the centre of the store stocks batteries, toys and condoms, with £1 stickers at every turn.

See more pictures of the BHS Food Store.

The store’s mix of convenience, hard discounting and department store values make it a bit of a hybrid offer. “They’ve managed to strike the balance between a conventional c-store and Poundland,” says Kantar Retail analyst Bryan Roberts. BHS says 150 of its 200 plus-estate can potentially host a Food Store. The second store, slightly smaller at 3,200 sq ft, will open next Thursday in Warrington.

What does it sell?

With just over 1,000 lines, Staines is heavy on branded goods and spans everything from fresh produce and meat to freshly prepared bakery. Supplied by Booker, its mid-tier (Happy Shopper) and basic (Euro Shopper) ranges, plastered around the store on everything from milk to soft drinks, are the closest the store has to own label. The £2.75 meal deal, which includes crisps, soft drink and sandwich, also looks to be an attempt to draw in the Boots crowd.

How does it compare on price?

The offer is heavily promotions driven with rafts of deals across the store.

Kingsmill 50/50 800g was on offer for £1 (normally £1.25); well over 10% cheaper than Tesco, Morrisons and Asda (priced £1.35 on their online sites on 27 March). Pepsi (2-litre) was on sale for £1 despite being price marked for £1.69. Asda was also charging £1 but Tesco and Morrisons were almost twice that price at £1.98.

The 20-pack of Walkers crisps comes in at £2.65 compared to Asda (£3) and Morrisons (£4.69), but Tesco is 11% cheaper at £2.34. So a bit of a mixed bag then. “Booker’s wholesale prices are generally too high to meet BHS’s obligation to be 10% cheaper than Tesco across the board,” says James Russell of discount wholesaler Rowan. “We’ve not seen anything to indicate that Philip Green is going to break the mould on price.” Roberts believes BHS will abandon the “headline-grabbing” 10% pledge pretty quickly. “The 10% outcome isn’t necessarily desirable for consumers as they are prepared to pay a premium for convenience,” he says.

Are rivals going to be worried?

The likes of Aldi and Lidl, having rattled the cages of much bigger rivals like Tesco, are hardly going to be quaking in their boots. Aldi says it “won’t be beaten on price, whether that’s against a big-four supermarket or a BHS.” But Aldi is not the target. “This looks like a solid proposition in combining good prices on GM and food, but it will work more against immediate comparable rivals than a Tesco Express or Aldi,” says Roberts, who reckons M&S may have most to fear. “They are undercutting it on food prices quite significantly in department stores across the street.”

Will it work?

Green certainly has lofty ambitions for the venture, promising to open at least 50 food stores within BHS sites by the end of the year, if, that is, the pilots succeed. “On the basis that everyone is going into the high street and convenience, If you don’t buy a ticket, you can’t win the lottery,” he says. But BHS remains a struggler within Green’s Arcadia empire. In its latest available results BHS made a £71m pre-tax loss on sales of £700m for the year 25 August 2012. The hope within BHS is that food can reverse its fortunes. It says 80% of customers now want to buy food there.

City analyst Nick Bubb is sceptical. “I will be shocked if this gets past a trial,” he says. “This is the last throw of the dice from Green to divert attention away from BHS’s poor performance and inability to match rivals like Primark and Next.”

At least a diversion might attract buyers, reckons Cantor Fitzgerald’s Mike Dennis. “Even if this becomes a complete rollout to 150 stores, they can only hope for £300m turnover at best and I don’t think they are going to achieve a 6% margin on that.”

The convenience sector is predicted to grow in value by 30% to £46.2bn by 2018 [IGD], but Dennis questions whether BHS is the right brand to tap that. “Tesco, Sainsbury’s and Morrisons alone will open 400 c-stores this year, so the market is overcrowded. Green will have his work cut out to make anything out of this.”

“Unless BHS does something unique and own label, targeting its offer like M&S, this will only have a limited offer in terms of attracting non-BHS customers,” adds analyst Graham Soult. “A lot of stores look like something out of the 80s and the recent refits were done to make the estate more upmarket and fashionable on clothing. I’m not sure how a Poundland-style offer sits within that, it seems a bit contradictory.”

See more pictures of the BHS Food Store.