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Tesco has launched a new price war by cutting its prices by £100 million in a bid to beat its nearest rivals.

Price-sensitive customers have been changing their shopping habits and grocers perceived as cheaper have been benefiting, while sales at Tesco have slowed.

Rival Asda has been basing its recent advertising campaign on its superiority in pricing over Tesco, while Morrisons has also reported a rise in shoppers.

However, Britain's biggest supermarket chain is fighting back by slashing its prices on over 3,000 products and will launch an advertising campaign to show the average basket of shopping is now cheaper at Tesco.

The retailer also criticised Asda's "misleading" price comparisons and said its own will reflect real shopping habits.

Tesco commercial and marketing director, Richard Brasher, said: "For years retailers have made claims and counter claims about who is the cheapest. But until now nobody has looked at what shoppers actually put in their shopping baskets to provide a true picture of what customers are really spending.

"Our new real baskets look at the actual products people buy every day including popular own brand items and essentials such as own brand milk, meat, fruit and vegetables so customers can be confident that our price claims reflect real shopping."

Results from a trial on Friday January 2nd showed 1.1 million baskets were cheaper at Tesco than they would have been at Asda, the retailer said.

Money saving offers will include three for £3 on Hovis bread and Muller yoghurts cut by half, from 54p to 27p.