In the News Teaching Activity – is Asda setting off a supermarket price war? (Mar 2025)

Fears of a grocery price war have wiped £3.5bn off Tesco, Sainsbury’s, and M&S shares as Asda signals aggressive price cuts to regain market share.

The UK’s supermarket industry is dominated by a handful of powerful players, creating an oligopolistic market where price wars can be risky and costly. Tesco and Sainsbury’s, with stronger balance sheets, may absorb short-term losses, but Asda’s financial position raises doubts about its ability to sustain prolonged discounts. Analysts warn that while price competition could pressure profits across the sector, Asda’s capacity to commit to deep, lasting cuts remains uncertain. If a full-scale price war unfolds, consumers could benefit from lower grocery bills, but workers may face job insecurity, producers could see tighter margins, and the government may collect less tax revenue from weakened corporate profits.

Tesco, Sainsbury’s and M&S shares take £3.5bn hit amid Asda price war fears | Supermarkets | The Guardian

1. Explain why the UK supermarket industry is an ‘oligopolistic market’.

2. Why do supermarkets often engage in non-price competition rather than price wars?

3. What are the advantages and disadvantages of supermarket collusion for firms and consumers?