(Bloomberg) -- Tesco Plc’s prices are closer than ever to those of discounters in the UK like Aldi and Lidl in a significant development for Britain’s largest grocer following a decade-long price battle.

The retailer has cut its pricing gap with discounters in half over the past three years and Tesco is improving efficiencies to better compete with the German retailers that have won over Britain’s middle classes. The difference is four times smaller than it was in 2008, Chief Executive Officer Ken Murphy told reporters Wednesday. 

Tesco has long been the dominant grocer in the UK but has had a turbulent past decade following an ill-fated expansion spree. While pushing abroad, the retailer took its eye off its home market, opening the door for Aldi and Lidl to attract shoppers hunting for bargains.

Tesco has won back market share by aggressively price matching with Aldi on key items. At the end of the first half, about 2,500 products at Tesco were on average 12% cheaper than at the start of the year.  

Falling prices will be welcome news for consumers although food is still more expensive than last year as a historic inflationary surge in Britain has lasted longer than expected. Price increases started to ease in the first half as global commodity costs dipped, and Murphy expects further improvement in the rest of the year.



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