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Asda signals new price war in UK

Asda this week acquired the UK arm of Netto in a deal worth around £778 million with the intention of increasing the company's exposure to smaller convenience stores. The company has already confirmed that the pricing in the smaller stores will be comparable to large Asda stores which will place pressure not only upon competitors such as Tesco but also independent convenience stores. While the move will require the approval of regulatory bodies it is unlikely to be blocked on market share terms alone.

It is the fact that the likes of Tesco and Sainsbury have for some time charged higher prices for goods available in their smaller convenience stores compared to the larger operations which is a concern. It all comes down to the number of people visiting these stores, the location and ultimately the volume of products sold. If Asda is looking to reduce prices and instigate something of a price war in the small convenience stores sector this would be to the benefit of UK consumers but the detriment of the small convenience store sector as a whole.

When you consider that recent research indicated the price of goods in smaller Tesco convenience stores can be anything up to 14% more expensive than the same goods in larger Tesco supermarkets there is certainly some margin for Asda to play with.

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