Price war is on as supermarkets continue to slash prices

The first shots in a new supermarket price war have been fired this week, with alcohol set to become a key weapon in the battle for market share.

Both Asda and Tesco have announced nearly £170m-worth of cost cutting across their UK stores and rivals Sainsbury's and Morrisons are expected to follow suit.

Tesco is already offering 50 per cent off selected wines, while Asda is currently selling Australian wines at 25 per cent off their usual prices.

Further cuts along the booze aisles are expected to follow, and licensees are concerned such deals will encourage more people to drink at home.

Stephen Hunt, licensee of the Old Crown in Staffordshire, slammed the "hypocrisy" of a government which spoke out against happy hours but still allowed supermarkets to run ever-cheaper promotions on drink.

"It is deeply frustrating because people will always buy more alcohol for less if it is available," he said. "I don't think my area manager will drop my rent if trade falls as a result."

Pete Harrison, licensee of the Unicorn in Leek, Staffordshire, which is 100 metres away from a Morrisons store, says he was tired of the way supermarkets were constantly undercutting the on-trade.

"Supermarket pricing policy has always had an effect on us. Our trade falls and all you see are people who are drunk even before they come into your pub," he said.

Ted Tuppen, chief executive of Enterprise Inns - and a critic of supermarket discounting - said they were continuing to behave in an "irresponsible manner".

"Quite simply they have to face up to their responsibilities," he said.

However, Mr Tuppen added the impact of cheap beer in supermarkets on good quality pubs could be overestimated.

"People don't stop going to great restaurants just because the carrots are cheaper in Safeway. A good quality pub should be able to maintain itself," he pointed out.

Announcing the price rises, Asda trading and marketing director Angela Spindler said: "Today's cuts are the deepest and broadest we have ever made and show that, when it comes to value, there are those who talk and those who deliver."