Despite the cost of its basket falling by only 2p, and narrowly missing out (by 31p) to Asda in this week’s Grocer 33, the change of direction at Morrisons following its announcement of a price war last week is clear, with 16 products on promotion (half of them price-only), and eight exclusively cheapest - more than any of its rivals.

“Who stands to lose most from this price war isn’t yet clear. What’s in no doubt is who most benefits - even more so now with the Chancellor’s Budget”

Adam Leyland, Editor

Perhaps more startling is how far off the pace Tesco’s basket was - almost £5 dearer. While its new Fuel Save promotion looks intriguing (and was being cleverly and extensively promoted this week), there’s still a danger Tesco’s store, range and loyalty-based differentiation risks being lost on consumers, with its £200m investment in prices clearly underwhelming the City. Shore Capital’s previously pro-Tesco analyst Clive Black went so far as to declare Tesco and the UK’s listed supermarkets in general “uninvestable” as, like all the sell-side analysts, he wrote down his forecasts unilaterally this week. Even Majestic has been caught in the flak.

What’s remarkable is how this is happening not at the onset of the recession, but as the first green shoots emerge. For so long, food was a safe haven versus discretionary markets. A combination of complacency, competition, structural change and strategic brilliance (and some spectacular own goals) has turned this on its head.

Also remarkable is that these downgrades come with the FTSE at its highest-ever value, and with a positive frenzy of retailer IPOs, including several grocery-related ones - although their success is precisely because they are not the property- and pension-laden behemoths the supermarkets have become.

Who stands to lose most from this price war isn’t yet clear, and it’s that lack of transparency as much as anything that the City hates. What’s in no doubt is who benefits. Even more so now with the Chancellor’s Budget - as he cut the price of beer, and froze the duty on whisky - 2014 will be a good year for the consumer.

Of course the Budget also favours UK brewers and distillers (over international winemakers). The harder question is where this leaves the government’s public health policies on alcohol. The fact the cut in beer duty will also reduce the tax on high-strength beers (by 0.75%) seems to have been lost. But these are the same high-strength beers the government has been trying to discourage us from drinking by slapping a ban on sales below cost - a far more effective way of tackling problem drinking than the hated duty escalator, the chancellor told us, when he switched it off. In delivering respite for drinks manufacturers, the government has simultaneously shot a hole in its tough stance on high-strength booze. As Private Eye might say: trebles all round!

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