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The supermarket price-war has edged up a notch after Sainsbury’s followed Tesco’s Aldi price-match scheme. The major supermarkets are fighting the German discount chains for business and price is their chosen battleground.

Tesco launched its Aldi price-match in March 2020 and extended it to around 500 products in September. Sainsbury’s – the UK’s second-largest supermarket – has now joined the fray, saying: “It will help shoppers who are working hard to balance budgets”.

It has promised to slash the cost of hundreds of essential groceries to match Aldi.

Prices will be cut on 250 popular items including meat, chicken, fresh fruit and vegetables and dairy. The price match is the first part of chief executive Simon Roberts’ plan announced in November to put food back at the heart of the business.

“We are making great progress delivering our Food First plan and I’m determined that in these tough times, we do even more to help our customers save money,” he said.

Squeezed margins

The grocery chains are under political pressure with rumours circulating that Chancellor Rishi Sunak is considering a levy on them for making “excess profits” during the pandemic.

But while people are buying more food to eat at home, the supermarkets say they are making less money.

Mr Roberts has said that that the pandemic has led to customers switching from its most profitable channel – convenience stores – to its least profitable – online shopping. Supermarkets make less money out of online shopping because of delivery and higher staffing costs.

The latest price-war will hit profit margins already squeezed to between 2-4%. But on the other hand, the move to online has benefited the traditional supermarkets as Aldi’s smaller online offering has left it unable to take advantage of the booming demand for home deliveries.

In fact Aldi has seen its sales growth fall behind some of its rivals during the pandemic.

Figures from retail analysts Kantar for the 12 weeks to 24 January 24 revealed that Aldi sales grew by just 5.7% compared with 12.2% growth across the UK grocery market as a whole.

The price war has seen rival supermarkets set up their own discounts and deals to try and attract customers through their doors or onto their online sites. As well as its Aldi Price Match, Tesco offers savings through its Club Card Prices and said: “We know that our customers want competitive prices for the products and brands they buy regularly.”

Aldi pointed out that “Consumer group Which? recently found that Sainsbury’s were over 31% more expensive than Aldi”. An Aldi spokesperson said: “Shoppers know that the only place you can get Aldi prices is at Aldi.”

Lidl, contrarily, avoids price drop campaigns in favour of low prices, although it does have a Pick of the Week special offer. It was awarded the title of cheapest supermarket in 2020 by Which?

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