Asda boss Andy Clarke adds £500m fuel to the supermarket price war with Tesco, Sainsbury's, Morrisons as well as discounters Aldi and Lidl ahead of supermarket Christmas earnings bonanza

Lynsey Barber
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Leading UK Supermarkets Compete For Their Share Of The Market In The Run Up To Christmas
Source: Getty

Asda is throwing a further half a billion pounds at the supermarket price war as boss Andy Clarke predicted another "challenging" year for the sector.

"There is currently no growth in the food market and the rise of the limited assortment discounters means that we must take radical action to win back our customers," said Clarke of the investment, which comes on top of £1bn spending on price cuts already promised as part of its Project Renewal turnaround plan.

He warned that the supermarket faces "turbulence in the short term" amid grocery deflation, rival supermarkets and upstart discounters Aldi and Lidl, as well as changes to shopping habits.

"We remain cautious and, as the Chancellor warned on Thursday, we expect that 2016 will be another year of intense pressure at a macro-economic level in addition to sales remaining under strain from price deflation, a continued competitive background throughout the sector and radically changing customer shopping habits," said Clarke.

"Our eyes are open to the fact that more impactful changes and decisive action still needs to be taken to make sure we remain not only a viable business, but a strong market-leading one."

Sales at the Walmart-owned retailer fell 4.7 per cent in the second quarter of 2015, which Clarke labelled a "nadir". However, they fell further in the third quarter and its Christmas trading revealed in fourth quarter results due in February are unlikely to change that trajectory.

The move comes ahead of a crunch week for the big four, with Tesco, Sainsbury's and Morrisons all set to release their Christmas results.

Pressure on the supermarkets' petrol station forecourts last week escalated as the big four lowered Diesel prices.

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