£300m from Asda steps up pressure on discounters

Asda is to spend £300 million on price cuts in the first three months of this year as part of a £1 billion investment to help close the gap with the discounters.

The Leeds-based retailer will cut the prices of 2,500 “essentials” such as fruit and vegetables, cereal, nappies, toilet rolls, milk, meat, eggs and fish.

The move is part of a five-year £1 billion strategy announced in November 2013 which Asda says will help push it further below rivals Tesco, Sainsbury’s and Morrisons on price while closing the gap with discounters such as Aldi and Lidl.

The four big supermarkets have been battling over a dwindling middle market which continues to be gnawed away from high-end Waitrose sales and rapidly expanding budget grocers.

Asda’s chief merchandising officer for food, Barry Williams, said: “After a great Christmas with the family, January is the month we all start looking at the size of our waists and our wallets.

“We’re going further than ever before, rolling back those every day, can’t live without items at a bigger percentage than we’ve ever been able to do previously.

“With hundreds of products at 50p, and even more at 15% less than normal, we’re aiming to make a big difference for families in their weekly shop.”

The supermarket said, in addition to price-cutting, it would be ploughing £250 million into “product quality, style and design”.

It said its investments would be funded by an operational savings programme as well as increasing the way it takes advantage of the purchasing power held by the giant WalMart group.

Asda reported its worst quarterly sales performance in nearly a decade in November.

Like-for-like sales fell by 1.6% in the third quarter to the end of September with the retailer warning that the turbulence stirred up by the supermarket price war would weigh on its performance for the next 12 months.