Rivals go to war over discounters
Asda suppliers expect squeeze as £500m price cuts unveiled
Suppliers to supermarket chain Asda are facing a squeeze after it announced the latest move in a price war with its rivals.
The supermarket chain, owned by US giant Wal-Mart, has slipped behind the other big four players and has been one of the main casualties of the discounters.
It has now announced a £500m price campaign which forms part of Project Renewal, a two-year programme within its five-year strategy to reinforce its position on value. This new round of price cuts come on top of the £1bn of discounts announced in 2013.
Chief executive Andy Clarke (pictured) described the investment as “radical action” to win back customers lost in a zero-growth groceries market to Aldi and Lidl whose market share has risen to about 10%. Asda has lost its second place to Sainsbury’s.
Mr Clarke said: “Fundamentally changing how we buy products means we can realise significant savings from our cost base and pass these directly to customers through a rebased pricing model.”
Asda is joining the European Marketing Distribution, a buying alliance which pools the buying power of 250 supermarket chains.
“We will continue to work with our suppliers to lower costs in our supply chain and return sales to growth in partnership,” said Mr Clarke.
He said the company’s trading point had reached a ‘nadir’.
Morrison’s this morning delivered an unexpectedly solid Christmas trading update in a welcome turnaround under new chief executive David Potts.
Like-for-like sales were up 0.2% in the nine weeks to 3 January, much better than the 2% decline predicted by analysts. However, figures from market researcher Kantar Worldpanel showed a decline for Morrisons because its data includes the loss of sales from those stores it has shut.
Kantar figures showed no Christmas uplift for the overall grocery market as sales fell by 0.2% on last year due to price deflation.
Sainsbury’s, Aldi and Lidl, together with Waitrose and the Co-operative grew sales ahead of the market and won market share.
Total sales at Sainsbury’s rose 0.8% in the 12 weeks to 3 January and its market share edged up 0.1%. Aldi and Lidl saw sales growth of 13.3% and 18.5% respectively. Waitrose’s sales rose 1.5%, while the Co-operative was up 1.4%.
Tesco, Asda and Morrisons all saw sales declines – of 2.7%, 3.5% and 2.6% respectively – and all lost market share.