Morrisons announces £1bn in discounts as Asda strikes back

Fresh supermarket price war looms

Several UK supermarkets look set to enter a big price war after Morrisons announced discounts worth £1 billion over the next three years.

Asda has already responded with an advertising campaign claiming to undercut Morrisons, reports The Daily Mail, while Aldi last night promised to save shoppers 35 per cent on their weekly shop.

The cost of some everyday essentials could fall by up to a quarter as ‘the big four’ (Asda, Tesco, Sainsbury’s and Morrisons) take on growing budget chains Aldi and Lidl. And Asda, Tesco and Sainsbury’s all pledge to match Morrisons’ prices.

Although the discounts are currently within the food category, it wouldn’t be surprising to see some of the big supermarkets slashing the price of non-food items such as PC/technology products and consumer electronics.

Morrisons and Lidl don’t currently stock tech products – but the other four major supermarkets do.

Shares dipped yesterday, with £2 billion wiped off the combined share value of Tesco, Sainsbury’s and Morrisons.

Morrisons CEO Dalton Philips said: "The biggest challenge that we face is that there has been a fundamental change in how consumers view discounters. They are no longer going to them out of necessity. The perception has changed and there is a new price norm.

"We are going to lower our prices on a permanent basis. The rules have changed and we must change too. It is absolutely critical that we begin winning again in our core supermarkets. To do that we must compete on price."

David Cumming of Standard Life added: "Aldi and Lidl are growing shares at double digit while the majors are losing market share and they have to do something about it. If they are relatively expensive – and the customers know it – they need a price reset, or price war, whatever you want to call it, before they can move forward in terms of sales."

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