SHOPPERS are likely to see a fall in prices during an expceted supermarket price war.
Competition sparked by the takeover of Safeway by Morrisons may save consumers £1bn this year, retail analyst Verdict said. This will mean about £40 off the average household's annual shopping bill.
The study said a significant period of price-cutting would lead to the sharpest fall in grocery prices in more than a decade.
Morrisons is likely to introduce more competitive prices at its acquired Safeway stores and may even join the fight for second place among the grocery retailers, Verdict said.
Richard Hyman, senior analyst at Verdict, said the £3bn move by Morrisons, which is expected to be finalised by March, would force the other main retailers to lower their prices significantly.
"The big catalyst for this huge reduction in prices is this takeover of Safeway," he said.
Verdict's study of grocery retailers predicted that Sainsbury's would be the retailer under the greatest pressure.
It said that Sainsbury's ability to deliver on its recent business transformation would have a large bearing on the fortunes of the grocery sector's leading companies.
The report showed Tesco was the clear market share winner last year, gaining 1.4 per cent to 20.8 per cent. Tesco was tipped by Verdict to be the long-term winner of the fallout following the Safeway takeover.
Verdict forecast that Asda, Sainsbury and Morrison would be separated by only one per cent by 2006.
It predicted that if Morrisons retained all of its Safeway portfolio and succeeded in raising the group's sales halfway towards its own, its share would increase to 12.3 per cent. This would place it just behind Asda's 12.8 per cent.
* Stronger Christmas sales failed to ease the pressure on Sainsbury's as the supermarket chain continued to struggle to leave its mark on rivals.
The group reported an encouraging two per cent rise in like-for-like sales for last month, but only a 0.1 per cent rise for the wider period covering the 12 weeks to January 3.
Sainsbury's blamed the disruption of its ongoing restructuring programme for the lacklustre third-quarter showing, saying that the festive performance was an indication of what it could achieve in the coming year.
However, shares slipped three per cent as analysts remained cautious about the company's position in the face of strong competition, particularly from price-cutting rivals Asda and Tesco.
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