Asda has come out swinging on price, but is anyone listening?

Who won Christmas? It’s a lot easier to say who lost: Asda’s shocking 6.5% decline in the four weeks to 27 December [NIQ] shows the Leeds supermarket is in real trouble, having failed to convince shoppers that improved price competitiveness is enough. It’s come out this week with another price pledge, but is anyone listening? It seems Asda is in danger of tilting at windmills, as Ken Murphy confidently declared that Tesco is “marching to its own tune” this week. When Asda kicked off a price war last April, Murphy’s caution on profits guidance spooked the market, but this week’s trading update advised they will be at the upper end as its market share inches back to 30%.

In another sign of Tesco’s confidence, it’s also brought back the old blue and white stripes for its new value branding – though it’s important to point out that the Value range itself will not be making a comeback. It’s about moving on from its earlier aping of Lidl’s yellow circle and blue square branding, which had been (confusingly) used to convey the value credentials of its Clubcard Prices promotions.

In contrast, I expect another of Tesco’s discounter hat-tips – the Aldi Price Match – to remain very much in Tesco’s plans. APM has done a brilliant job at signalling to the consumer who Tesco sees as the competition. In that regard it has arguably let the smaller of the two discounters off the hook, and with Lidl’s market share increasing even more than Tesco’s, our reigning Grocer of the Year was comfortably the fastest-growing bricks and mortar retailer over Christmas, its sales up 10% [Worldpanel 12 w/e 28 December].

The contrast between Lidl’s success and Aldi’s relative underperformance is also instructive. While Aldi shows the same single-minded focus as Asda on value, Lidl’s more digital- and more loyalty-based approach is finding greater favour with shoppers. Aldi is keeping pace with Lidl when it comes to opening new stores, but with sales up only 3% in the four weeks to Christmas Eve, and with grocery price inflation at 4.3% [Worldpanel 4 w/e 28 December], it’s either lowering prices faster than the market, or losing same-store volumes, or both.