Asda is facing attacks on all sides as it continues to come under pressure from unions, rival retailers and analysts.
Its fears of losing the number-two spot came a step closer to reality this week as TNS till roll data for the four weeks to February 26 revealed that both Sainsbury and Asda had market shares of 16.1%. However, they remain dwarfed by Tesco’s 30.6%.
Citigroup said that Sainsbury would move into the number two spot next month, confirming predictions made by Asda boss Andy Bond and
Sainsbury CEO Justin King last year.
To stave off Sainsbury’s advances, Asda is preparing to open its first new-format Essentials store at the end of the month and will launch its eagerly awaited new ad campaign and slogan - ‘More for you, for less’ - next week. But analysts fear that its new emphasis on fresh and quality doesn’t fit with the retailer’s cheapest supermarket promise.
One analyst said he could not see how Asda could match fresh, quality products to its low price points. “When you look at the amount of cost engineering that goes into a supermarket product and you are producing something to hit a certain price point, the first things to go are the quality ingredients.”
Clive Black, a retail analyst at Shore Capital, said that Asda could not compete on price alone and needed to attract new customers but it would be a slow process.
Another analyst said: “Tesco, Sainsbury and Morrisons all have a materially better food offering than Asda. It has to solve this problem and it will be hard to keep all of its suppliers happy as it does this.”
Adding to its woes, as The Grocer went to press Asda managers were meeting with GMB officials to stave off a strike ballot among 11,000 union members who work in the retailer’s depots. An Asda spokeswoman said that, as the union had less than 10% membership, any strike action would cause limited disruption.
Meanwhile, Asda will be going back to its retailing roots when it opens its second Essentials store in Pontefract, near Leeds, where the founding Asquith brothers trialled their first supermarket in the 1960s. It will open in May, following the unveiling of the first Essentials store in Northampton at the end of this month.
The announcement comes as competition hots up for listings within the format’s 5% branded offer. An Asda spokeswoman said it would not stock branded products where its own label was particularly strong.
The only brands to get the nod so far are Nescafé, Stella Artois, Mars and one Kellogg’s cereal.
Rachel Barnes & Ronan Hegarty