Safeway stepped up the pressure in the supermarket price war yesterday when it pledged to match its competitors on key fresh produce prices and offer refunds on a range of other products if shoppers found them cheaper elsewhere.
The move follows intense price cutting, first by Asda and later Tesco, that has seen the price of bananas tumble to as little as 19p a pound compared with 49p only a few weeks ago. Asda yesterday increased its banana prices to 29p per pound, with effect from today - a move to be matched by Tesco.But even at this price Safeway would be selling at a loss. It buys its bananas at 30p per pound.
Safeway has promised to match the lowest prices on other lines of fresh produce: cauliflowers, loose tomatoes, carrots and onions.
It has also relaunched its Price Watch campaign in the run-up to Christmas, offering lower prices on 100 lines such as brussels sprouts and boxes of Roses chocolates. Customers will qualify for refunds on these products if they find them cheaper in rival supermarkets.
Colin Smith, chief executive of the Argyll group, which owns Safeway, said: "We have matched and will continue to match our competitors on price."
Though Mr Smith did not mention his competitors by name, it is thought Safeway finally tired of Asda's price cutting and reluctantly decided to follow suit. However, Mr Smith also called for the supermarkets to call off hostilities. "We need to get some sanity back in the situation," he said.
Clive Vaughan of the retail consultants Verdict Research dismissed the price battle as a phoney war. "This is not really a price war, it is just posturing. They are not cutting prices across a really wide range of goods."
Asda said it believed its prices were consistently lower than Safeway's. Tesco also said it would not be out-gunned.
Safeway's comments came as Argyll announced a healthy set of trading figures for the six months to 14 October. Pre-tax profits increased by 5 per cent to pounds 215m on sales that were flat at pounds 3.4bn. Like-for-like sales, a key measure in the industry, increased by 7.8 per cent in the six months and by 9.6 per cent in the last six weeks. These figures are among the best in the industry. Safeway attributed the rise to its popular "Harry" advertising campaign and its ABC loyalty card, which was launched last month and already has 3 million members.
Safeway says it plans to open 17 new stores next year and the same number in 1997. The openings will create 7,500 jobs. These follow nearly 5,000 redundancies announced earlier this year as part of a radical shake-up of the business.