Kwik Save, Britain's largest discount supermarket operator, sparked off a new phase in the grocery price war yesterday when it announced a nationwide promotion that will cut up to 15 per cent off the price of one in 10 of its top brands.
While rivals such as Asda dismissed Kwik Save's actions as a "panic move", others promised to retaliate.
Netto, a Danish discount operator that moved into the UK a couple of years ago, said it would match the prices if any of its lines were directly undercut.
Netto also dismissed the cuts as a publicity stunt doomed to fail. John Buitekant, trading controller, said: "Frankly, I'm sceptical about these price war promotions. They had one last year which was about as effective as a wet lettuce. They are talking this time of cutting the price of Lyons Battenburg cake. That doesn't sound like a leading item to me."
Most Kwik Save stores carry between 3,500 and 4,000 lines, mostly well- known brands rather than own-label, which will mean price cuts on up to 400 products.
A tin of Heinz beans and sausages comes down from 31p to 27p. A bottle of Piat D'Or wine will be reduced from £3.65 to £3.35. Lyons Battenburg will be cut to 69p against the 89p charged by Tesco and Sainsbury.
Kwik Save's marketing director, Nick Goss, said: "It's a case of re-establishing ourselves as the supermarket of outstanding value. We need to make both existing shoppers and potential new ones aware of how good our prices are."
The promotion will be backed by a heavy advertising campaign starting today.
Tesco, with its own lower-priced range called Value Lines and a New Deal promotion on branded products such as Kellogs, Heinz and Flora, said the Kwik Save promotion was not significant. Sainsbury said its own-label products offered similar value at cheaper prices than leading brands.
Kwik Save has been under pressure in the grocery market where it has been caught between the larger superstore operators such as Sainsbury and Tesco, which have launched their own budget lines, and the aggressive Continental discounters such as Aldi, Netto and Lidl, that have been invading the UK market for five years.
Kwik Save announces its half-year results tomorrow.
They are expected to show a decline from £65.5m to £63.4m. Like-for-like sales are also believed to have fallen in the second half.
City analysts were doubtful, however, that Kwik Saves' actions would spark off a full-scale price war.
Tony MacNeary, food retail analyst at NatWest Securities, said: "I don't think it will make that much difference. The major rivals will look at it item by item and tweak their prices as necessary.
Kwik Save shares fell 8p to 571p.