Families are about to reap the benefits of a supermarket price war in time for Christmas.

Leading grocery executives said that they were increasing their promotional activity to gain market share in what will be a fiercely competitive period, while analysts said that falling food price inflation would give supermarkets a “war chest” to allow for reduced prices.

Supermarkets are also chasing the money that shoppers would have spent at collapsed stores such as Zavvi and Woolworths in previous years. This has already led to price battles in the entertainment and toy markets.

Tesco, Britain’s biggest supermarket, doubled the discount available through its loyalty card scheme this year to allow customers to receive their extra money-off vouchers in time for Christmas shopping. Sainsbury’s and Morrisons, Britain’s third and fourth largest supermarket chains, also offered improved voucher schemes. Asda has not released a loyalty card, but has provided a series of non-food deals.

Tesco, Sainsbury’s and Asda have held sales on toys, cutting the prices of doll’s houses and toy soldiers in the hope of gaining the market share that was once held by Woolworths.

David Potts, Tesco’s director of retail, said that promotional activity had increased across the industry. “There are more sales on discount than last year.”

He added that Tesco was moving towards simpler, every day discounts, rather than “entertaining” mark-downs and buy-one-get-one-free offers, which make it more difficult for customers to work out what the underlying price is.

“What customers want is everyday low prices. When customers are tightening their belts they like certainty of pricing, they like round price points and they like being able to rely on prices being consistent.”

Morrisons has introduced a Christmas Collector Card that gives customers a £25 voucher if they spend more than £40 in a single transaction in five out of the six weeks up to December 20. The chain is the only one of the big four that does not have a significant non-food section, and has feared losing sales to rivals offering the chance tp buy Christmas gifts as well as groceries.

Angus Maciver, group marketing director, said: “This year we have seen more investment in promotions but at the same time big investment in loyalty. Both have gone up.”

Morrisons introduced its Christmas scheme last year with £50 million worth of vouchers redeemed. This year it has increased the value of the vouchers from £20 to £25.

Morrisons has also introduced a Christmas dinner for eight with all the trimmings for £2.78 a head.

Data released yesterday showed that competition between stores had intensified and there had been a rise in the speed that supermarkets were increasing their sales.

Tesco has increased its share of the market to 30.7 per cent. According to TNS, the market researchers. Sales rose by 4.7 per cent in the 12 weeks to November 1 against the same period last year. This compared with 8.5 per cent for Morrisons, 6.6 per cent for Asda and 5.6 per cent for Sainsbury’s.

Even at the higher end of the market, Waitrose and Marks & Spencer are becoming increasingly competitive. For the first time M&S named its rival in a price comparison advertisement.

The major supermarkets passed on an unprecedented level of food price inflation last year. All of the companies improved their profit margins despite record increases in food commodity prices. But this year, with food inflation moving towards zero, retailers are asking suppliers for lower prices so that they can undercut rivals.

Richard McKenzie, partner at OC&C, the strategy consultants, said: “This should give retailers a war chest to do something on pricing. Ordinarily price wars come after Christmas, but this is a sign of greater aggression than we have seen in recent years.”

Fierce competition among supermarkets means that food suppliers are under pressure.

Northern Foods, one of Britain’s largest food producers and the makers of 60 per cent of Britain’s Christmas puddings, has shown that it will turn down contracts to supply major retailers if it believes that they are being pushed too far. This year, Tesco switched from Northern Foods to one of its rivals for the supply of its Christmas puddings.

Stefan Barden, chief executive of Northern Foods, said: “Retailers are always competitive and I respect that. Their job is to ask us for better quality products at a lower price and ours is to prove that we can get a better product than the next company. In the long term, food prices are still going to go down.”

Matt Pullen, marketing director at Bernard Matthews, the turkey farmer, said that demand for frozen turkeys, which can feed a family for less than £3 a head, had been stronger this year already.

He said: “Retailers seem to have started promotions early and that’s making shoppers buy early. It’s going to be very active this Christmas.”

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax