Grocery price inflation has dropped to a low of 0.2% in recent weeks, the influence of discount supermarkets held back the sector's growth and contributed to a massive decline in Tesco's market share.
According to research carried out by Kantar Worldpanel, Britain's largest supermarket saw its market share fall 4% year-on-year, from 30.2% to 28.8% in the 12 weeks ended 17 August.
The data also indicated that sales at Morrisons rose 2.4% in the period - the first signs of growth since it initiated a major price-cutting strategy.
Grocery price inflation fell for an 11th consecutive period to the lowest recorded since October 2006, reflecting the impact of the increasing popularity of discount supermarkets and the response of the rest of the market.
Deflation also played a part, with the average price of several major food categories seeing a drop compared to the same period last year.
Tesco's sector peer Sainsbury endured a sales declined of 2.2% and a slight decline in market share from 16.5% to 16.4% year-on-year, while Morrisons market share remained under pressure at 11.0%, having fallen from 11.3% a year earlier, although sales rose.
Discount retailers Aldi and Lidl were the main catalysts of the changes in the market, jumping from 3.7% to 4.8% and from 3.1% to 3.6%, respectively.
Asda, which was the first of the 'Big Four' supermarket chains to attempt to fight back against these raiding European discounters also climbed, up from 17.1% to 17.2%
At the other end of the market, upmarket chain Waitrose saw its market share increase from 4.8% to 4.9%.
Edward Garner, director at Kantar, said: "Competitive pricing among the big grocers and deflation in the price of staple items such as vegetables, milk and bread has driven inflation down yet again. This naturally impacts on the overall growth of the grocery market, which has fallen to a 10-year record-low of 0.8%.
Broker Shore Capital noted that with consumer behaviour in the UK changing, resulting in more careful household budgetings and increasing eating out, this is creating "perfect storm" conditions for the Big Four retailers, which have been "taking their customers for granted through much of the economic downturn".
Shore analyst Clive Black said the data implied Tesco like-for-like sales down by circa 5.0-6.0% for its second quarter 2015, against favourable comparatives and underscores the reasons behind recent plans for regime change.
"We expect Tesco UK to be more competitive on base pricing as part of a re-engineered offer to its customers under designate-CEO Dave Lewis, who commences work in October. Such an offer is likely to involve a re-based margin and we cannot rule out a cut in the group's dividend pay-out; somewhere between a 25-50% cut would be our central expectation."
He remained more sanguine about Sainsbury's capability to compete and said Kantar's data on Morrison's "suggested potentially strong recent trade" as Kantar suggest a 30 basis point reduction to 11.0%, suggesting that sales fell 1.9% - better than the City expects.
Black noted that while Aldi and Lidl are still growing at high rates, they have had perfect trading conditions and now "the free lunch may be coming to an end".