Asda will invest another £500 million in price cuts as part of "radical action to win back our customers" as it predicts another year of "intense pressure" for supermarkets.
The latest investment, which takes its total to £1.5 billion since 2013, will be introduced over the next five years.
Asda boss Andy Clarke said: "The structure of UK grocery retailing has permanently changed to reflect the way that customers shop today."
He added: "We saw the change coming and responded in 2013, but we didn't move fast enough."
The news comes ahead of a week in which Asda's rivals publish their sales figures for the Christmas period, with Asda publishing its own in February. Analysts expect Asda to have been one of the hardest hit over the Christmas period by the growing rise of Aldi and Lidl.