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Asda spending £500m in price war

By Yvette Shapiro

A "price war" between the big four supermarket groups looks likely after Asda announced that it will spend a further £500m cutting prices in its stores.

This latest investment comes on top of the £1bn "Project Renewal" spend promised by Asda in November 2013 to slash prices over five years.

It's another indication of the intense pressure on Asda, Tesco, Sainsbury's and Morrisons from the German discounters, Lidl and Aldi, which now control around 10% of the UK grocery trade.

Neither Morrisons nor Aldi operates in Northern Ireland.

"We must take radical action to win back our customers," said Asda chief executive Andy Clarke. "We expect that 2016 will be another year of intense pressure at a macroeconomic level, in addition to sales remaining under strain from price deflation, a continued competitive background throughout the sector, and radically changing customer shopping habits."

Christmas was disappointing for the retailer, with sales falling 3.4%, while the three months leading to the end of September marked the company's fifth consecutive month of falling profits.

"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," said Mr Clarke.

But a price war could spell further bad news for farmers and small producers, who say margins are being squeezed to the point that businesses are no longer viable.

On Saturday, the Belfast Telegraph revealed that a leading Co Down farmer is receiving just 14p per kilo for his potatoes - which sell in the supermarkets for £1. Robin McKee, a key figure in the campaign to win special European status for the Comber potato, said: "Prices are still a very long way from sustainability and I do not know what the answer is. Certainly, the producer has no input."

The Comber case comes after the Belfast Telegraph highlighted one Co Armagh farmer who discovered turnips which he was paid 8p for were then being sold at up to 10 times that price, and the same with carrots. The Ulster Farmers' Union says some cattle farmers are losing more than £200 a head and were suffering as a result of sustained downward pressure on prices. The UFU is organising a series of area meetings across the province this month to attempt to tackle the low price crisis.

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