which began in earnest last summer when local chains launched an unprecedented price war -- escalated this month with the arrival of two new discount drug chains in the area.

Bud's Deep Discount Drug Store & More, a new subsidiary of Peoples Drug Stores Inc., opened its doors a week ago in Greenbelt, promising consumers large savings on goods ranging from drugs to toilet paper to mayonnaise and canned vegetables -- even the popular Trivial Pursuit game.

Meanwhile, fives miles away in New Carrollton, the first local franchise of the 40-store discount chain Drug Emporium has opened, offering savings on a wide selection of drugs, cosmetics, health aids, perfumes and pet supplies.

The two stores are only the first of several discount drug outlets expected to appear in the D.C. area over the next two to three years.

And with Washington already considered one of the most competitive drugstore markets in the country, the arrival of the two deep-discount chains promises to make the rivalry among the five large chains -- Peoples, Gray Drug Fair, Dart Drug, Giant Food Inc. and Safeway Stores Inc. -- all the more intense, drug-industry officials say.

Within days of Bud's opening, for example, Drug Fair printed a special 12-page "Price Buster" promotional brochure offering large discounts at its Greenbelt store a block away from Bud's. "We have lowered prices on our Greenbelt store to meet or beat any of Bud's or Giant's prices!" the brochure proclaimed.

"This is more competition for us," acknowledges Ernie Moore, spokesman for Safeway's Washington division. With 18 drugstores in the area, Safeway has been battling the larger chains for customers.

"It's too early to say how successful the discount chains will be," Moore says. "I don't think they will hurt us on the food end because they don't have the variety on the line that we do. But it is something we are going to have to watch."

Bud's represents Peoples' first attempt to enter the relatively new but highly profitable discount drugstore business. Although the store could well draw business from Peoples, company officials believe it is better to start their own discount chain than to get get beaten by the competition.

"If we don't do it, somebody else would," Peoples Chairman Sheldon W. (Bud) Fantle said earlier this year when he announced corporate plans to form the chain.

Today, Fantle is anything but modest about Bud's. "It's the most spectacular store in the world. I wouldn't have put my name on anything that wasn't the best," he says with a chuckle.

In fact, corporate officials note that the name was chosen over the protest of an embarrassed Fantle. But officials say they liked the name because it reminded them of other successful discount drug chains, such as Ike's, located in the South, and Howie's in Canada.

Although Bud's offers many of the same items as Peoples, Fantle is confident it won't adversely affect the traditional drug chain. "We believe that 80 percent of shoppers want convenience and service and 20 percent shop for price. Bud's is our answer to the 20 percent."

What's more, in promoting itself, Bud's is seeking to position itself as a competitor to the grocery stores, not the drugstores. "The beef's at the supermarket, the bargains are at Bud's," proclaims one of the first signs a shopper sees when entering the discount store. In fact, there is significantly more food at Bud's than at any Peoples store -- food products account for as much as one-third of the store's inventory, Fantle says.

Run as a completely separate operation from Peoples, Bud's has its own merchandise buyers and only obtains goods at cut-rate prices. As a result, Fantle says, Bud's will not have every size and flavor of Crest toothpaste all the time. Rather "there will probably be just one size -- the one we can buy at the better price," he says.

Having invested nearly $3 million in the first Bud's, Fantle says Peoples has ambitious plans for the experiment, hoping to open four more in the Washington area within a year as well as stores in the Midwest.

The New Carrollton Drug Emporium is also the first of many planned for the area, says Bill Dargusch, president of the Mid-Atlantic Drug Distributors, the company that owns the franchise rights to the drug-discount chain in this area. "We hope to have eight to 10 more within the next two years," he says.

"In my opinion, Drug Emporium is the most successful deep-discount drugstore operation in the U.S.," says David Pinto, editor of Chain Drug Review.

However, Pinto notes, because the stores are franchised, their quality varies from area to area.

The chain was launched six years ago in the Midwest by Phil Wilber, who had spent his whole career in drugstore merchandising. His philosophy differs from Bud's in that the chain concentrates solely on drugs and health and beauty aids and spends very little space on foods.

"Wilber doesn't want a shopper to come in once a week and buy incidentals," Pinto says. "He would rather the shopper come in once a month and spend $50, leaving with five bottles of shampoo and three bottles of hairspray."

Unlike Bud's, the local Drug Emporium will offer discounts on a complete line of products -- "every single size, every single flavor, every single day," Dargusch says.

A random sampling of prices at Bud's, Peoples and Drug Emporium shows that, more often than not, one of the two discount chains has the lowest price. But in some cases, the traditional drugstores had the lowest prices, even on items that were not on sale.

A 15-ounce bottle of Head & Shoulders Shampoo was $2.97 at Bud's, $3.19 at People's, and $3.28 at Drug Emporium. But at the Drug Fair one block from Bud's, the same item was only $2.48.

And at Peoples, a 30-tablet package of Sudafed decongestant cost $2.59, three cents less than at Drug Emporium and eight cents less than at Bud's.

The deep-discount drugstore "represents another cycle of retailers exercising their versatility and flexibility," says Jeffrey Metzger, publisher of Food World, a Columbia, Md., publication that keeps tab on the grocery market here. "Five years ago, Basics entered the area and everyone thought that the D.C. area would go discount. It did for a while, but then everyone quit after seeing a reduction in earnings," Metzger notes.

The same thing is likely to happen in the drugstore industry, Metzger predicts, noting that Giant's earnings have dropped since it launched the drug price war last summer.