Asda cuts prices and demands Tesco investigation

Supermarket giant Asda unveiled new price cuts today as the boss of its US owner Wal-Mart called for a British government investigation into rival Tesco.

Supermarket giant Asda unveiled new price cuts today as the boss of its US owner Wal-Mart called for a British government investigation into rival Tesco.

Asda said the reductions and promotions, worth more than £130m, were part of its 40th anniversary celebrations and not a reaction to a recent report that said its products were not as cheap as its biggest competitor.

At the same time, Wal-Mart president and chief executive Lee Scott said it was time for the government to act ver Tesco’s share of the grocery market, which last week increased to a record 30.5% for the past three months.

Asda has far fewer stores than Tesco at 280 and is the UK’s second largest grocery retailer with a market share of 16.7%, ahead of Sainsbury’s at 15.7%.

Mr Scott told the Sunday Times: “As you get over 30% and higher I am sure there is a point where government is compelled to intervene, particularly in the UK, where you have the planning laws that make it difficult to compete. At some point the government has to look at it.”

Tesco described the 30.5% figure as “misleading” because it did not factor in trading by the likes of Marks & Spencer, adding that its share of the wider UK retail market was in the region of 13%.

Lucy Neville-Rolfe, Tesco’s corporate and legal affairs director, said: “Previous Competition Commission inquiries have found that the market – and Tesco – operates in the consumer interest. It is a competitive market. The consumer is the winner.”

Asda said the latest price cuts meant it had invested £361m in lowering prices this year – its biggest annual investment to date.

Last week it disputed the findings of a report by investment bank Goldman Sachs, which said Tesco had edged ahead of Asda for the first time since its pricing survey began in December 2001. Asda said other studies “continued to show our price gap to Tesco”.

But it was forced to stop calling itself “officially Britain’s lowest priced supermarket” by the Advertising Standards Authority last week, following a complaint from Tesco.

In today’s interview with the Sunday Times, Mr Scott revealed that Asda was looking at the possibility of opening smaller convenience stores in an attempt to tackle the growth of the Tesco Metro format.

He said: “A lot of Tesco’s growth has come from the small convenience chain. Andy (Bond, chief executive of Asda), and his team have got to look and see where the opportunity is for us with that kind of space.”

Wal-Mart has an estimated 10% share of the retail market in the United States.

In response to Asda’s price cuts, Tesco said: “Our customers know that we are cheaper on more products, more of the time, than our competitors. We have been getting cheaper for customers over a number of years and have now invested nearly £2bn in price cuts.”

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