Milk price cut as store war hots up

The supermarket war intensified today with a pint of milk at the centre of the ferocious store price battle.

Asda announced it was cutting the price of a two-pint bottle of milk from 80p to 50p - its lowest price since 2001.

The move sparked angry reactions from farmers who claim that the battle could force them out of business.

Spiralling food prices have been blamed for the steepest rate of inflation in 16 years. The average weekly grocery bill for a family of four has risen by 25 per cent in a year to £127.

This week Tesco introduced Fresh'n'Lo milk, costing £1.06 for a two-litre bottle. On Wednesday, Asda and Sainsbury's dropped the price of a two-litre bottle to 99p.

And although Tesco said it would not be dropping its milk price further, it then announced it would be discounting one in four products across its range of 70,000 goods.

It also said it was cutting the price of organic produce by 25 per cent.

Aldi, the discount chain, has also pledged to review its milk price.

Asda's latest "food for 50p" promotion includes orange juice and white bread, both of which are half price.

Asda insisted that it was investing £1 million of its own money in the milk promotion and that no farmer would lose out.

A delegation from the National Farmers Union was due to meet Tesco today to seek guarantees that a price commitment to 850 farmers will remain in place.

Gwyn Jones, the NFU's dairy board chairman, said: "We are playing with people's livelihoods here. The competition between retailers is intense. If they are going to pay for these promotions out of their own money, then all well and good.

"But we know both historically and from experience they will come looking for farmers to help redress the balance. They don't often give up any of their margin for long."

The price war has been brewing for weeks with consumers facing the combined effects of rising food, energy and fuel prices. The credit crunch has seen families change their shopping habits, heading for value lines with discount stores like Aldi and Lidl reporting a hike in sales.

By Business Editor Amy Bould