Warning on supermarket price war

Northern Foods, a leading supplier of milk and convenience foods, yesterday became the latest company to warn about the impact of the supermarket price war, writes Heather Connon.

'The demand for lower prices and downgrading is very strong,' Christopher Haskins, chairman, said. 'But in the longer term we do not believe that excessive discounting and product downgrading are sustainable or capable of meeting consumer expectations for quality perishable foods.'

His comments came as the group reported a 5.4 per cent rise in pre-tax profits to pounds 72.1m for the six months to September. But the rise was the result of a fall in interest costs. At the operating level, profits were static at pounds 81.4m.

The dairy division was worst hit. Doorstep milk deliveries dropped 11 per cent as some supermarkets offered milk at about 20p a pint, compared with 38p for home delivery. The damage was, however, limited by a rise in sales to supermarkets, which account for half of Northern's business, and dairy profits rose slightly to pounds 40m.

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