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January 4, 2011

UK: Tesco, Morrisons unveil price cut campaigns

UK retailers Tesco and Morrisons have announced price cuts to a raft of grocery products in a bid to cancel out the effects of the rise in VAT, which has come into effect today (4 January).

UK retailers Tesco and Morrisons have announced price cuts to a raft of grocery products in a bid to cancel out the effects of the rise in VAT, which has come into effect today (4 January).

Tesco said it is investing GBP340m (US$530.4m) in the January cuts, which will include brands such as Kellogg’s, Walkers, Heinz and Cadbury, plus fresh produce, meats and own-label products. The retailer believes the deals will save the average shopper GBP27.84 on a basket of everyday products.

Tesco’s marketing director Carolyn Bradley said: “January is the most financially challenging month for many families as people recover from the festive season. Our customer insight shows that many people want to save money in January but not give up the brands they want to buy.”

Tesco has also unveiled a “free upgrade” of so-called quality improvements on around 800 Tesco products.

Morrisons, meanwhile, has pledged to cancel out the effects of the rise in VAT with savings worth an estimated GBP520 per family per year. The UK’s fourth-largest retailer claims it is reducing the price of an average basket of groceries – 44 items – by GBP39.27 per week.

The ‘Price Crunch’ campaign, which will run to Easter, covers around 5,000 grocery items, many of which will be “more than half price”, the retailer said. Brands include McVities, McCain, Heinz, Kellogg’s and Morrisons own label.

Morrisons group commercial director Richard Hodgson said: “We understand that 2011 is set to be a tough year for consumers, so our ‘Price Crunch’ helps cancel out the effect of the rise in VAT. These are not 1p price cuts – these are genuine savings on essential groceries that will cut the cost of the weekly shop significantly at a tough time for families.”

The tax rise, announced in last year’s Budget, sees VAT rise from 17.5% to 20%. The hike mainly affects non-food products, although items such as ice cream, crisps and chocolate will be affected.

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