01 February 1999

TESCO EMBARKED on a new round of hefty price cuts last month with prices on 240 key products slashed by up to 25%. City analysts described it as the largest price-cutting campaign since 1993. Many see the move as a lunge for Sainsbury’s jugular, following the announcement by Britain’s number two grocer that its Value to Shout About campaign had done little to boost sales and a lot to dent net margins. Tesco denied accusations from cynics that its price initiative was motivated by the current Office of Fair Trading investigation into charges of profiteering among the Big Four supermarkets. ‘This is all about doing what the customers want us to do’, trilled a Tesco spokesman, butter fridge-solid in his mouth. The move is expected to cost Tesco an initial £60m, trimming 0.35% from its 5.5% gross margin; its shares nevertheless held steady whilst those of Sainsbury, Safeway and Somerfield slid by circa 3%.