Euro raises chance of supermarket price war

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CONTINENTAL discount supermarkets such as Aldi and Lidl could use euro buying power to launch a price war in markets such as the UK, according to a report published today.

A study by the consultancy group European Insight claims that retailers such as Aldi, which is one of Germany's biggest supermarket operators, could choose to pass on the buying gains in the form of even deeper discounts.

The move would place Britain's beleaguered supermarket sector under further pressure. It is already the subject of an Office of Fair Trading investigation into alleged profiteering and there has been a growing backlash against some prices of consumer goods in the UK compared with those on the Continent.

Aldi has been growing steadily in this country after opening its first stores here in 1990. It offers rock-bottom prices by using little-known brands in a basic store environment.

The study claims that Marks & Spencer also has a strategic opportunity to take advantage of uncertainty over monetary union. It is already ahead of many other UK retailers in its euro preparations as it is in the process of converting all its tills to take the new currency.

"If it can shrug off its other problems, it can reinforce its traditional brand strengths and become the most trusted retailer across the euro zone," the report says. The study names Marks & Spencer, Aldi and Ikea as top of the "trust league". These are the companies consumers feel are most likely to adopt "transparent" pricing across Europe when the new currency comes into effect.

In the UK the top retailers are M&S, WH Smith, Boots and Sainsbury's, while John Lewis and Aldi both do well. Those least trusted in the UK are the oil companies BP, Esso and Shell.

Ikea, the Swedish home furnishings retailer, scored well across Europe. Benetton showed marked regional differences, doing well in some markets but appearing among the "most distrusted" retailers in France. Kingfisher, the UK retail group, also did well in the rankings.