The Tesco Group has delivered a strong performance and record sales over the Christmas and New Year period. Group sales increased by 11.6% during the seven weeks to 10 January 2009, driven by continued rapid international expansion and steady growth in the UK.

In the UK, like-for-like sales, excluding petrol, increased by 2.5% in the period. Tesco reports like-for-like sales inclusive of VAT - and adjusting for the reduction in VAT rates, which came into effect in early December, growth on a comparable basis was 3.5%. Although this is likely to be substantially behind the figures of Sainsbury's, Morrisons and Asda, Tesco has strongly hinted it is preparing to further step on the accelerator in the price war raging in the grocery sector.

City analysts said Tesco's underlying UK sales had been dented by the launch of its lower-priced discounter branded products in September. Andrew Higginson, Tesco's chief executive of retailing services, said: "They [discounter brands] have been fairly well received by customers. It is a long game and you have to wait to see how it pans out."

Tesco's non-food performance strengthened a little compared to the third quarter and their services businesses have performed well. In addition the group's overseas businesses also proved profitable over the festive period, delivering a total international sales increase of 32.7%.

Although they may be lagging between their major rivals in the food sector, the group as a whole is looking healthy.

So what is the next logical step for Tesco to take to remain competitive in the supermarket price war? Should they continue with the lower cash margin [discounter] brands, or follow Sainsbury's lead and move from branded products into higher-margin own-label products?

What influences you most when you do your weekly grocery shopping? Do you go for branded, own-label or discount products?

As always we welcome your comments...