LONDON - Britain??s top supermarkets are offering deep price discounts and promotions in an effort to win customer loyalty, the Financial Times reports.
The action has experts questioning whether the fight will begin to eat into corporate bottom lines, as companies struggle to retain customers.
"This is a very noisy price skirmish," said Greg lawless, an analyst at Collins Stewart.
Analysts said that the latest moves take their roots from events of two to three years ago, when commodity prices forced manufacturers to increase food prices, which were subsequently passed along to customers.
The price increases coincided with the start of the recession, which led to falling sales volumes. As a result, manufacturers were forced to offers deals to grocers, which are being passed along to consumers.
According to consumer research group Kantar Worldpanel, in the 12 weeks ending January 24, nearly 32 percent of U.K. supermarket sales involved promotions, compared to 28 percent in 2008. While promotions typically peak before Christmas, they have continued into the New Year.
Price cuts have also been increased, with stores offering discounts between 26 percent and 34 percent on promotional items.
According to one unnamed suppliers, up to three-quarters of all promotions are supplier-funded. However, the promotions do not always originate from manufacturers. Many retailers are focused on boosting their positions and have pursued promotions independent of supplier offers.
Industry analysts predicted that price pressure could intensify further. Asda, for example, recently announced a move to permanently lower prices rather than introduce temporary promotions. And Tesco has begun strengthening its loyalty scheme, offering double rewards for every dollar (pound) spent.
"Everyone is watching everyone??s prices like mad," said one unnamed executive. "It looks like, whereas it was not really a price war before Christmas, going into [the new year] quite a few people are finding it tough. I suspect we are going to see quite a lot of nervousness [about] how the rest of the year is going to unfold."