Tesco is to spark what could be the fiercest price war of recent years as it seeks to launch a stronger value message to set itself apart from rivals.
The Grocer has learned that Tesco has been block booking advertising space for the end of this month for what is believed to be a huge price cutting campaign. It is expected to make an announcement within the next week. Revealing market-beating like-for-like sales increases of 5.7% this week for the seven weeks to January 7, finance director Andrew Higginson told analysts it would be taking a “very aggressive” approach to pricing in the year ahead.
One analyst said he expected Tesco to try to head off the issue as early as possible with a pricing campaign being at the forefront of its plans this year. “Tesco is supremely dominant, but its dominance of the UK market is diminishing slightly with Sainsbury now managing to convert secondary shoppers into primary shoppers and Morrisons stemming the losses from the Safeway base.”
However, despite Sainsbury’s best efforts to sharpen prices and the launch of a nationwide non food January sale, he did not believe it could afford to continue to fight back as hard against Tesco’s price cuts.
Simon Proctor, an analyst at Charles Stanley, said: “No one is under the illusion that Tesco can produce figures like 5.7% in perpetuity; it will slow down. But there is soft market share up for grabs and Tesco will take it.”
However, Citigroup said Tesco could be hit by exchange rate fluctuations in international markets, higher bad consumer debts hitting Tesco Personal Finance and a slowdown in non food market in the UK taking the edge of domestic growth.
Rachel Barnes