Price war warning
SUPERMARKETS are on the brink of a major price war which could cut farmer suppliers incomes.
The Wal-Mart take-over of Asda last year is just the start of a prolonged battle to win market share, says Verdict Research chairman Richard Hyman. "It will get bloodier and bloodier."
In the companys annual How Britain Shops for Food survey of 4000 shoppers, Mr Hyman says that Wal-Mart plans to double Asdas profits in five years.
"To do this it must take a big slice from the others (retailers) so will have to cut prices aggressively."
And the remaining supermarkets will have to follow. "They have no choice and cannot allow too wide a gap between themselves and Asda," he says.
Mr Hyman believes fresh food price cuts will be limited. "Nevertheless there will be downward pressure and some suppliers will fall by the wayside."
John Thorley of the National Sheep Association is very concerned, pointing out that the sheep sector had already lost 15,000 farmers in the past five years.
"Supermarkets cannot go on pulling the price down without causing substantial problems to the farmer, rural environment, and pressure on farming families," he says. "Its absolute madness out there. Why cant people pay properly for food."
If price wars intensify, Mr Thorley believes the numbers of sheep producers could fall to 25,000. "Nothing short of devastating." *