The Leeds-based retailer will target households squeezed by falling real wages as it locks horns with Sainsbury’s in the battle to be Britain’s second biggest supermarket.
It says its new strategy 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.
Asda, which is owned by US giant WalMart, announced the investment as its latest trading update showed like-for-like sales growth of just 0.3 per cent.
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.
Now Asda appears to have set its sights firmly on shoring up its position at the cheaper end of the business. Chief executive Andy Clarke said: “We regard ourselves as the UK’s leading value retailer and it is against this backdrop that I have today set out our strategic priorities which will improve, extend and expand the business over the next five years.”
Asda said: “The £1bn price investment will enable the retailer to widen its price gap to the ‘big three’. The investment will also close the price gap to the discounters.”
The supermarket said, in addition to price-cutting, it would be ploughing £250m into “product quality, style and design” and seeking to expand into London and the South East to increase physical access to the brand from 53 per cent to 70 per cent by 2018.