Tesco will cut the price of bread in order to compete with Aldi, Lidl and others

Tesco is ready to cut the price of bread as Britain’s largest supermarket competes with Aldi, Lidl and other rivals.

The supermarket , which earlier this week reduced the price of the milk to below that of the German discounters , said the cost of ingredients, including grains and oils, were beginning to fall, meaning there could be more price reductions on the horizon.

Tesco’s Chief Executive Ken Murphy said, “We hope you start to see deflation in certain areas like bakery.” He also added that the retailer will be “very vigilant” and “very rigorous” in negotiating a lower price with its suppliers if it can see their costs dropping.

After months of price increases, Mr Murphy said that bakery had been one of the areas which experienced “the most inflation”. The cost of gas and flour has risen in response to the Russian invasion of Ukraine.

According to Assosia figures published by The Grocer, at Warburton’s the price of a sliced loaf of white bread increased 16pc between January and February. Jonathan Warburton, the chairman of Warburton’s Bakery, told The Telegraph earlier this year that price increases were “eye-watering”. The market had been brutal,” said Warburton.

Morrisons has also reduced the number crumpets that it stocks to try and avoid some of the additional costs.

Tesco made its latest remarks a day after announcing that it would increase its price-cutting effort, by lowering the cost of a litre of milk below Aldi or Lidl. Sainsbury’s announced that it would match Tesco’s price on Thursday.

Mr Murphy stated that Tesco has “removed the price as a factor for customers to shop somewhere else” in recent years and is now “the most competitive company we have ever been”, locking prices on over 1,000 products until July.

In order to maintain lower prices in the face of a sky-high inflation, the grocery store’s profits before tax were halved statutory to PS1bn at the end of its last financial year.

Tesco’s operating profits fell by more than 6pc over the course of the year. The steeper fall in statutory figures is due to a writedown on Tesco’s property value, which the company blamed on macroeconomic variables. After a major management shake-up, the company was also hit with higher restructuring costs.

Mr Murphy said, “Customers don’t have to worry when shopping with us about paying more.”

As more shoppers look for the best deal, traditional stores are struggling to attract customers. Kantar figures show that 62.8 million pounds of spending from Tesco went to Aldi during the 12 weeks leading up to the end March. This is more than any other supermarket.

Tesco, Britain’s biggest supermarket, has a market share of 27pc. Sainsbury’s is second with 15pc.

Mr Murphy stated that the current conditions “favour discounters” because cost-of-living pressures are weighing on household budgets, and German supermarkets have launched in new cities and towns. Aldi’s and Lidl’s sales have grown by more than 25% year-on-year, while Tesco has only seen a 5pc increase.

Tesco has said that it expects its profit to remain flat for the entire current financial year, ending in February.

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