Sainsbury chief executive Sir Peter Davis mounted a robust defence of his claim that his company will achieve industry leading margins at the Schroder Salomon Smith Barney Annual Food Retailing Conference.
Sir Peter was challenged by SSSB director David McCarthy, who said that Sainsbury could not hope to challenge Tesco. He claimed the larger retailer had cost advantages because of its size.
However, Sir Peter pointed to his company's investment in stores and logistics and said: "We will end up with a business engineered to work on lower costs. Maybe it is too ambitious to get there as quickly as I said, but I still believe we will get there."
He also suggested: "Tesco may find it cannot hold margins at current levels if it has to fight Asda."
Sir Peter also rejected suggestions that shortfalls in Sainsbury's pension fund would cause a drain on the business.
He said: "Concerns have been overstated. I joined Sainsbury from a pension company and one of the first things I looked at was the pension fund."
He said the company had restructured the fund in 1998 and closed it to new entrants earlier this year. "We put Â£15m extra into it last year and will put more in this year. We are dealing with it in a sensible way."
However, he added that he would have more to say on the subject when the group's interim results were announced in November.
Quizzed on the trial of Boots concessions in stores, Sir Peter said results varied greatly.