Outlook: Smokescreen won't save supermarkets

ANOTHER DAY, another round of supermarket price cuts. This time it is Asda wading in with 1,000 discounted items in a move that will cost it an extra pounds 50m. Pampers nappies anyone? Come on down; the price is being cut from pounds 12.75 to pounds 9.99. Chicken Tonight curry sauce? Asda certainly knows its market - down from pounds 1.35 to a lip-tingling 99p. Marvellous.

Coming just days after Tesco attempted to grab the headlines with a similar round of cuts, and a couple of weeks after the price of bread sank to 7p a loaf in the so-called "bread wars", it is worth asking the question: are these the first shots in a full scale price war? Or are they just bits of tactical, PR posturing that just happen to have been launched a couple of weeks ahead of the expected publication of the OFT report on supermarket profiteering?

Life has undoubtedly got a little tougher for our supermarket behemoths. But a look at the official retail figures shows that compared to other sectors, food prices have held up very nicely for the grocers. While footwear and clothing prices were under constant deflationary pressure last year, food prices rose by 2 per cent. The rise added around 0.5 percentage points to the overall inflation increase of around 2.5 per cent.

Certain prices have shown remarkable rises. The price of potatoes in January was 29 per cent higher than the same month a year ago, for example, though supply issues are a major factor here. Tea, where supply is less obviously a problem, went up by 9 per cent, fish by 12 per cent and fresh vegetables by 7 per cent.

Retail prices of pork (one of the items reduced in price by Asda yesterday) fell by 11 per cent. But this was in a year when the wholesale price of pork plummeted because of oversupply in Europe and the evaporation of demand from Russia and the Far East. Was all that price fall passed on to customers before yesterday's little manoeuvre? You bet it wasn't.

When Asda reported its half year results in December its margins had fallen by just 0.2 per cent year on year. Not much pain there. One thousand sounds a big number, but more than a third of the cuts are confined to poor selling and narrow product ranges like fruit flavoured teas and sun lotion.

There's no getting away from it. As the OFT puts the finishing touches to its report, it is becoming very clear that the supermarket sector is one place where the major players can definitely afford to charge lower prices - and permanently. Government proposals to introduce regular shopping basket price comparisons, plus a kick from the OFT, will force them to do just that.

Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
News
news
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
PROMOTED VIDEO
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
Arts and Entertainment
La Roux
music
Arts and Entertainment
Graham Fellows as John Shuttleworth
comedySean O'Grady joins Graham Fellows down his local Spar
News
people
News
Ross Burden pictured in 2002
people
News
Elisabeth Murdoch: The 44-year-old said she felt a responsibility to 'stand up and be counted’'
media... says Rupert Murdoch
Arts and Entertainment
tv
Extras
indybest
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Java Developer - Banking - London - Up to £560/day

£500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...

HR Business Analyst, Bristol, £350-400pd

£350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

Account Manager - (Product & Account Management, Marketing)

£26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried