The pressure on the major supermarket chains from discounters were underlined by Sainsbury's annual results which showed the slowest profits growth for a decade.
Underlying profit before tax at the chain rose 5.3% to £798m in the year to March 15 though like-for-like sales for the period were almost flat, edging up just 0.2%.
While the performance capped nine years of profits growth for outgoing boss Justin King, he warned conditions in the food sector were likely to remain challenging for the foreseeable future as consumers remained cautious.
Sainsbury's, which trails market leader Tesco and is battling Asda to be the country's second-largest supermarket chain, has credited a focus on quality and affordable own-brand products for its ability to grow sales.
Tesco, Asda and Morrisons recently announced big price cut campaigns in a bid to arrest sliding market shares and profits.
Discounters Aldi and Lidl have benefited at their expense while upmarket chains Waitrose and Marks & Spencer are also gaining
share.
Mr King, who will hand over the reins to commercial director Mike Coupe in July after 10 years in charge, warned: "While the general economic outlook is showing some signs of improvement, conditions in the food retail sector are likely to remain
challenging for the foreseeable future as customers continue to spend cautiously."
But he told Sky News: "We've had a very strong year. I leave in a couple of months and I'm very proud to be able to announce these results today on behalf of the 160,000 colleagues at Sainsbury's."
The chain insisted it was confident its differentiated offer, which includes a focus on own brand products, the "Brand Match" pricing scheme and the Nectar loyalty card, would allow it to outperform peers in the year ahead.
Though Sainsbury's 16.8% market share is its highest for a decade, there are worrying signs too after its nine-year run of quarterly sales growth came to an end in its fourth quarter, when like-for-like sales fell 3.1%.
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