Tesco tools up for price cuts war

Tesco plans to take on its discounting competitors by continuing its own price cuts offensive, which saw pre-Christmas offers on staples like vegetables.

New boss Dave Lewis is emulating the price slashing strategies of upstarts Aldi and Lidl, with a range of new reductions, averaging 25% on 380 branded products.

A former Tesco UK director who declined to be named told Reuters: "Lewis will find a way to knock the life out of those discounters and it may feel like carnage for the next two years, but Tesco has too many powerful tools in its tool kit not to come out fighting."

Tesco announced the price of a pack of 80 Tetley teabags was cut to £1.99 pounds from £2.29, while the price of a 750 gram pack of Kellogg's cornflakes was cut to £1.98 pounds from £2.48 - two examples where the store is coming close to the discounts offered by Aldi and Lidl.

Tesco has a better than expected Christmas, as underlying sales fell 0.5% in the festive period, having fallen 4.4% in the previous three months.

Lewis's strategy complements price cuts with more shop floor staff, which should translate to better-stocked shelves and shorter queuing times at the tills.

Lewis said: "The period to Christmas was an encouraging first step. But nobody is under any illusion that we've got much much more that we need to do."