Asda has unveiled plans for a 300-strong essentials range to recapture its reputation for budget. But suppliers are calling it ‘impossible’
Asda’s billionaire owners the Issa brothers last week set out ambitious plans to rejuvenate the supermarket’s offer, including proposals for a range overhaul that will see the launch of a new budget range.
The supermarket has asked suppliers to support a 300-product range, called Just Essentials by Asda, which it wants to go live as early as next month.
So what’s the plan? And will it work?
Since the Issas took over, Asda’s competitiveness as a value retailer has loosened, with prices creeping up and the value range cut back, amid increased focus on premium products.
The new range, following on from its Jack Monroe-inspired volte-face over the availability of Smart Price range, appears to signal a significant change of heart.
Setting out its strategy at a semi-virtual conference in Leeds last week, Asda outlined what it called a “bold” move to reaffirm its price credentials, while also tackling quality perceptions. As well as the new range, it set out plans to revamp store layouts, extend the 16-store trial of its new loyalty card across all its UK stores, and to cull thousands of SKUs in a range reset to simplify its offer still further.
Action needed
There is little doubt of the need for urgent action to recover Asda’s old magic, especially with the country facing huge financial challenges.
It’s not just Jack Monroe – who has been critical of the offer. Paul Stainton, a partner at IPLC Europe and a former group buying director at Aldi, says Smart Price has been in dire need of a rethink for some time.
“The current Smart Price range contains products that formed the fighting ground across the mults and the discounters in the early days, when the discounters had bigger ranges in their value tiers,” he says. “But of the 140 current SP items, Aldi are only head-to-head with an Everyday Essential (EE) equivalent on 40 of these”, because Aldi is concentrating more on every day value and quality, he adds.
Asda has also been losing competitiveness even where it does go head to head.
“The current Smart Price range contains products that formed the fighting ground across the mults and the discounters in the early days”
SP Wholemeal Bread 800g is 39p, compared with Aldi’s EE Wholemeal Bread 800g at 36p. Equivalents in Lidl, Tesco and Sainsbury’s are also cheaper than Asda, Stainton notes.
Likewise, SP canned Spaghetti/Spaghetti Hoops 395g sells at 16p, compared with Aldi’s EE Canned Spaghetti Hoops 410g at 13p.
“Asda seem happy to be out-of-line with Aldi on several prices, despite this being the value-tier where really they have to be the same,” says Stainton. It has also been “out of whack” – a phrase Asda used in its presentation last week – on a raft of other products such as potatoes, tomatoes, peppers and carrots, while still attempting to claim value credentials.
“Asda has lost their way on price leadership,” he adds. “It has lost its way on range and quality too”, he adds.
“Their current range is, in places, old hat – reminiscent of the white label value ranges of the 1990s. Products currently sold under Smart Price such as frozen beef mince with onions, fruit flavoured ice lollies, chilled cheese & bean bakes, and thin bleach are not what today’s more discerning shopper is looking for.
“This new strategy reminds me of 2010 when Aldi reset itself to focus on offering the right quality and range, near to full shop’, with quality but also a focus on fresh and British, price (as always) and a better shopping experience– all of which contributed to its dynamic growth and success of the 2010’s.
“I’m also reminded of Tesco’s Project Reset in 2015 when they realised they were over-complicating their business and not focusing on their core offer.”
Asda’s new plan in a nutshell
New budget range: Rollout of 300-strong Just Essentials by Asda range is twice as large as Smart range, and spans categories from beans, bread, crisps and snacks to non-food products like washing-up liquid.
Wider range review: Across all categories as well as a simplified promotions strategy. Asda says reset will “further simplify our range and modulars” ensuring there are no more than three iterations of the same products and with no product promoted more than three times in any 12-month period.
Price and promotions: Asda says it will simplify prices to make sure they are “stable, intuitive and never out of whack”. It says prices should be “easy to add up”.
Store revamps: It is to overhaul its meat fish & poultry section in May and revamp its bakery offer in September.
Loyalty: The trial of Asda Rewards grew from 16 to 50 stores from this week. The scheme is set to expand to 150 in summer and to all stores this autumn.
Source: Asda presentation to suppliers
Yet this could be where comparisons end. Ged Futter, founder of The Retail Mind and a former senior Asda buyer, says Tesco’s carefully executed phasing out of its Tesco Value range was a world apart from what the Issas are proposing.
That starts with the timing. “In expecting suppliers to support the launch of a new own label brand across 300 products in four weeks, Asda are not asking something that is difficult, they are asking the impossible.” Indeed it’s understood the supermarket was greeted with gasps audible even over Zoom.
And despite the financial clout that has put them in the running to buy Boots, today’s supply chain issues will make it impossible for the Issas to successfully reposition Asda’s price positioning in such a short timeframe, says Futter. “Yes, the Issa brothers have big pockets, but let’s not forget they took over from Walmart, the biggest retailer in the world.”
“It’s totally unviable,” adds a supplier source. “Even in the best of times these timeframes would be impossible, but we are not in normal times. We have product shortages, staff shortages, label shortages. The world has gone mad and it’s even madder for them to expect this to actually happen.”
Another Asda supplier adds: “The timescale Asda has given is ridiculous. We are in a situation where anything that is imported cannot be delivered in four weeks, it’s just impossible. I suspect even for UK suppliers the timeline is too tight.”
Questions have also been raised over whether such a timeframe could put Asda on a collision course with the GSCOP.
“The code requires reasonable notice about changes to supply agreements and here we have Asda going out to suppliers and saying we’re going to do all this in four weeks, crack on with it,” says Futter. “Whenever you shorten timeframes, you increase the costs and Asda are expecting suppliers to pick up the bill. They are not going to stand for it.”
Stainton says the impact of the four-week timeframe could be cushioned if Asda merely switches its 140 Smart Price and 40 Farm Stores products over to new packaging.
“Yes, the Issa brothers have big pockets, but let’s not forget they took over from Walmart, the biggest retailer in the world”
But that would conflict with other elements of the plan presented to suppliers, which promised Asda was not just out to recapture its price credentials but to boost quality along with physical store layouts too.
“Sadly, it is unachievable – even in normal times, let alone today, when all suppliers and retailers are sorting out huge cost increases, ensuring availability and looking at temporary reformulations to cope with non-availability of certain key ingredients such as sunflower oil,” says Stainton.
“I get the feeling that everything else has taken a back-seat at the moment, including new product development/launches.
“To launch an entirely new 300-strong range of Just Essentials in four weeks would be miraculous.”
Yet anyone who has witnessed the Issas rapid rise to the top and the work they have carried out with the EG Group stores will be reluctant to write off their strategy.
And as the second supplier says: “The Issa brothers will have a huge war chest from all the extra profit generated on fuel sales – despite its lowering of prices this week.”
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