Tesco throws first punch in price war

SHOPPERS have been urged to force supermarkets into an all-out price war as the rising cost of living begins to bite hard into household budgets.

Consumer champion Eddie Hobbs wants hard-pressed households to wield their spending power and force shops to compete for custom by cutting prices.

His comments came after Ireland’s biggest food retailer, Tesco, announced price cuts on 5,000 products and pledged reductions on 5,000 more. Rival Dunnes Stores yesterday remained tight-lipped on whether it would respond.

Mr Hobbs told the Irish Examiner: “Tesco has fired what appears to be the first salvo in a price war and logically you would think that Dunnes have to respond.

“The expectation is that Dunnes will follow suit within three weeks as it takes a while to organise a response to such a wide range of price cuts like Tesco’s.

“After that, it’s down to the consumer — if Tesco and Dunnes start cutting prices aggressively and the consumer doesn’t respond then they won’t cut prices as far as they have to.”

Mr Hobbs reckons consumers are more willing to take up special offers as household budgets are tighter than they were a year ago. From next month Bord Gáis bills are set to rise by 34% and electricity bills are expected to increase by 10% to 20%.

Inflation is running at 4.2% while interest rates are predicted to rise to 3.5% by the end of the year.

Mr Hobbs said: “More people are going to become ‘price shoppers’ instead of ‘convenience’ shoppers as mortgage rates and energy bills are going up.

“This means more people are going to look seriously at their shopping bills than they would have done 12 months ago.”

Tesco’s price cuts follow the abolition in March of the Groceries Order law, which banned stores from passing to shoppers the generous discounts given by suppliers.

Stores were slow to lower their prices so in May Mr Hobbs told shoppers to bombard supermarket bosses with emails and phone calls demanding price cuts.

Tesco pledged to reduce prices and yesterday completed a programme of 5,000 price cuts by knocking 12 cents off a bottle of its own-brand Cabernet Sauvignon wine, which now costs €7.83.

Tesco’s Dermot Breen shied away from talk of a price war but admitted the cuts were aimed at winning more business in the Republic, which is home to 94 of the chain’s supermarkets.

He said: “If consumers respond to this (our price cuts) and if it grows our business then we both win.

“We are investing in price cuts and there’s the question being asked about who is going to do it next. We will have to wait and see.”

Dermott Jewell, of the Consumers’ Association, welcomed the price cuts and extra competition but said the reductions in shopping bills were long overdue.