Asda is under no pressure to make acquisitions despite the consolidation raging around it in the UK market, according to president and ceo Tony DeNunzio.
Speaking at the Wal-Mart shareholders’ meeting at the parent company’s home town of Bentonville, Arkansas, he told The Grocer his company had plenty of opportunities for growth without buying another company.
Shrugging off questions about Marks & Spencer he says: “There is no pressure. The market share figures speak for themselves. Despite a more competitive market we have maintained our momentum and have continued to grow market share.”
He insists there is still plenty of space for growth and that Asda is being smarter about ways to exploit opportunities.
“In the past we were fairly tied to a 45,000sq ft standard store. Today we have stores of 15,000sq ft and we have stores of 100,000sq ft.
“We are much more creative about the configuration of the stores, so whether it is a town centre, shopping centre or out of town store, we can be flexible.”
Although the four stand-alone George stores are still officially a trial concept, DeNunzio highlights its potential for growth. The trial is two fold: to establish whether customers are receptive to the concept, and they certainly seem to be, but also whether the economic model works. With Asda’s lower margins it will have to generate much higher sales than its high street rivals to remain viable.
“So far we are very happy, but it would be nice to see a full cycle for a full year to see how the stores trade on an ongoing basis,” says DeNunzio.
One sector Asda will not be getting involved in is the type of c-store chains Tesco, Sainsbury and Somerfield have been snapping up. The sticking point for DeNunzio is the need for such small stores to charge higher prices than their bigger cousins in order to remain viable.
“We have decided not to go into the convenience market because that would mean higher prices,” he says. “With our brand territory - with Asda price and price leadership - if you have different prices in different stores or different regions then that destroys some of that trust.”
Although he concedes disappointment at being blocked from making a bid for Safeway, DeNunzio says it was not a setback for his company.
“It was always a ‘nice-to-have’ rather than a ‘must-have’ for us,” he explains. “We never relied on a positive outcome for our strategy. We had to plan on the basis that it couldn’t happen or it wouldn’t happen. So we are just carrying on with the plans.”
However, following Morrisons sell-off of stores to Waitrose and the deal to sell more to Sainsbury, DeNunzio cannot resist a dig at his Yorkshire rival. “Clearly Sir Ken is picking his opposition,” he says.
He concedes that he would like to be able to buy some of the remaining stores, but won’t be drawn on numbers or timing.
With the Safeway acquisition, Morrisons stepped up from being a strong regional competitor to be a national player, but DeNunzio says they have long been rivals.
“We compete with them in our home market. We are a Yorkshire-based company too and we compete head to head with Morrisons more than anyone else.”
The key change brought about by the deal, he says, is much greater concentration on pricing across the industry with some competitors attempting to reposition themselves.
“We have seen price cuts at Sainsbury and Boots and that creates a whole new dynamic. For us the key challenge is to maintain our price leadership position, but also focusing on our real core differences around non foods and George.”