Major supermarket slashes prices as it takes on Tesco and Sainsbury’s | Personal Finance | Finance
Asda has ignited a price war, slashing grocery and fuel prices to win back customers. The move has sent shockwaves through the market, with Tesco, Sainsbury’s, and Marks and Spencer seeing their share values tumble as investors brace for deep price cuts that could send profits into a tailspin. Allan Leighton, Asda’s new chairman, has vowed to reinvigorate the chain’s competitiveness. He has launched the most significant investment in pricing since his first stint at the retailer in the late 1990s. This development is a boon for millions of shoppers and will force rival chains to respond with their own price cuts.
The supermarket has already knocked 4p off the price per litre of petrol and diesel across its forecourts, undercutting rivals and sending shockwaves through the fuel market. Experts warn that this could reignite the competition that had cooled following Asda’s acquisition by private equity firm TDR Capital and the Issa brothers in 2021, which resulted in prices remaining artificially high. Tesco, the UK’s leading supermarket, took the biggest hit, with shares plunging more than 12% on Monday. Sainsbury’s fell by 8.5%, while M&S saw a 7.5% drop. The drop was driven by fears of shrinking margins as the sector gears up for aggressive discounting.
The retail industry is rapidly evolving, prompting one analyst to warn: “Any grocer caught flat-footed in this changing environment could suffer.” Britain’s biggest supermarket chains have been struck by an astonishing £4 billion downturn recently, Somerset Live reports.
Asda’s market share plummeted from 14.6% in 2021 to just 12.6% as shoppers switched their allegiance to rivals such as Tesco and Sainsbury’s. Nonetheless, Asda’s Chairman Stuart Leighton is preparing a significant investment strategy focusing on competitive pricing and store refurbishments.
He said: “This will be the biggest commitment to Asda Price and Rollback since I first launched them,” signalling a return to aggressive price wars. Their revamped “Rollback” initiative, now spearheaded by fitness expert Joe Wicks, has already slashed prices on a host of products.
Retail guru Natalie Berg said: “Leighton knows exactly how to make Asda a powerhouse again. His strategy is bold, but the key question is whether it will be enough to shift customer loyalty back in Asda’s favour.”
Asda’s decision to cut petrol prices amid rising fuel costs has sparked a broader conversation. RAC spokesperson Simon Williams praised the move, urging other retailers to emulate Asda’s lead and “pass on savings from lower wholesale costs”.
He also hinted that if oil prices remain steady around $70, we could see the cheapest petrol prices in four years. On the other hand, there’s growing recognition of the mounting pressures on the retail industry. Tesco has boosted staff wages by 5.2%, ensuring a minimum of £12.64 per hour, but balanced this rise by eliminating extra pay for Sunday shifts.
Meanwhile, Shore Capital analyst Darren Shirley cautioned: “The supermarket price war is far from over. This is just the beginning of what could be a prolonged battle for market dominance.”