Somerfield launches new campaign of price cuts

The supermarket battle entered another phase yesterday when Somerfield, which also owns the Gateway stores, announced a series of price cuts backed by an pounds 8m advertising campaign.

Shares in rivals such as Sainsbury, Tesco, Asda and Argyll all fell several pence in response. However, retail experts ruled out a full scale price war saying Somerfield's campaign was little more than an attempt to revive its dwindling market share and unimpressive sales growth.

Somerfield's initiative, which starts today, is an extension of the Price Check campaign launched two years ago which the company claims has increased sales by pounds 500m.

The 618 supermarkets, half of which still trade under the Gateway name, will be offering discounts on 1,000 products. This includes nine at half price and a further 104 reduced by 25 per cent. Four cans of John Smith's Bitter will fall from pounds 3.29 to pounds 1.99. Deep pan pizzas are cut from pounds 1.99 to 99p.

The advertising campaign started last night and features the actress Leslie Joseph, who plays Dorian in the BBC comedy Birds of a Feather.

David Coles, Somerfield's marketing director said: "This is a very clear first step towards building a recognised image for the Somerfield brand." The company said research showed that its customers' main preference was for good value for money.

City analysts were doubtful that Somerfield's campaign would spark a reaction from rivals. Tony MacNeary, food retail analyst at NatWest Securities said: "It is not as significant as the Price Check launch in 1993. This time is is just a normal promotion. It is not a return to a price war."

Somerfield's concentration on price runs contrary to rival strategies such as Sainsbury and Tesco which have been attempting to fight the battle on customer service grounds.

Sainsbury's said it did not expect to respond with further price cuts: "We have more than 1,000 products on special offer every week. We are also confident that our customers are more interested in consistent value for money rather than reduced prices on a handful of products."

Tesco said it already had budget ranges such as its Value Lines launched two years ago and its loyalty card which offered further discounts.

Asda, which has established a reputation as a lower cost alternative to Sainsbury and Tesco said Somerfield's scheme had no sense of permanence.

Somerfield's campaign is expected to hit Iceland and Kwik Save hardest as both compete on price and are often close to Gateway branches. Iceland announced disappointing results last week and Kwik Save has also seen underlying sales fall.

Somerfield has been struggling to establish a strong position in the market following the ill-starred Isosceles management buy-out of Gateway in 1991 which left the group burdened by debt. In July it announced profits up five per cent to pounds 69m on sales static at pounds 3.1bn.

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