Supermarket giant Tesco has announced the start of a £500 million ‘price cutting offensive.’ The shake-up, Tesco hopes, will help it claw back ground it has lost to other retailers in the UK, but many observers have expressed concern over who will foot the bill for Tesco’s price cuts. image expired

Tesco director Richard Brasher said the chain would be cutting 30 per cent on around 3,000 everyday foodstuffs, mostly from its own-brand range. The cuts will include milk and fruit and vegetables.

Amid fears that, as with other price-war tactics suppliers would have to pay the difference for lower costs at the till, Tesco has offered assurances that producers would not bear the brunt of its new pricing strategy. It said it could offset most of the loss in revenue by ending its ‘double Clubcard points’ promotion.

The supermarket insists that it will save £350 million by ending the promotion, although it has not been forthcoming about whence the remaining £150 million will come. A spokesperson for rivals Sainsbury’s denounced the new scheme as a PR stunt, saying, "This is classic smoke and mirrors from Tesco, giving with one hand and taking with the other."

Despite Tesco’s assurances, analysts remain sceptical about the impact such a move could have. Fears persist that reducing the cost of foods, including milk and fresh produce, could set a precedent and increase pressure on branded goods manufacturers and other supermarkets to follow suit.

Tesco said it would also be reducing offers including multi-buys, particularly for fresh produce, which it is widely acknowledge results in wastage; ‘buy one get one free’ multi-buy offers are infamous amongst producers as it is they who have footed the bill for such supermarket practices in the past.