Asda That's Better screen shot_resized

Asda has unveiled its hotly anticipated new price war initiative with a move to cut prices on thousands of everyday items by an average of 15%.

The new campaign, called ‘That’s Better’, will also involve “improvements in quality” to Asda’s own-label products as well as better availability on fresh produce items. A new TV ad to promote ‘That’s Better’ will go live on 10 September during ITV’s The X-Factor. 

This week we’re taking the next step in our journey to deliver better value for our customers and to improve quality

Sean Clarke, Asda president and CEO

Key price cuts announced today include a 28% cut in the price of a 325g pack of large prawns, from £4.87 to £3.50; a 24% cut for tomato ketchup and brown sauce, from 75p to 57p; an 8.6% reduction in the price of own-label beef mince, from £1.85 to £1.69 for 500g; and a 6.5% cut for 345g packs of Butcher’s Selection bacon, from £2.30 to £2.15.

“Customers will see their weekly shopping budgets go further as prices fall on the products that really matter,” Asda said.

At a glance: Asda’s key price cuts

  Old price New price Change
Beef mince (500g) £1.85 £1.69 -8.6%
Whole British chicken (medium) £2.95 £2.69 -8.8%
Bacon (Butcher’s Selection, 345g) £2.30 £2.15 -6.5%
Prawns (large, 325g) £4.87 £3.50 -28.1%
Sausages (Extra Special, 400g) £2.48 £2.25 -9.3%
Tomato ketchup and brown sauce (510g) 75p 57p -24.0%
Instant coffee (200g) £1.75 £1.59 -11.2%
Basmati rice (1kg) £1.70 £1.49 -12.4%
Cheese (British, 350g mature block) £2 £1.80 -10.0%

Improved quality and availability

The retailer added it was investing in its supply chain to improve quality and availability on fresh fruit and veg.

“Supply chain and process investments will put even fresher fruit and vegetables on shelves and improve availability for customers by working in collaboration with our exclusive growers and sourced through Asda’s IPL – Britain’s second largest, privately owned food processing and supply business,” it said.

Asda president and CEO Sean Clarke, said: “This week we’re taking the next step in our journey to deliver better value for our customers and to improve quality. We will continue to listen to our customers and take action, with better prices for products they buy week in, week out.” 

A major new Asda pricing initiative has been on the cards ever since Sean Clarke replaced Andy Clarke as CEO earlier this summer.

In July, a report by analyst Dave McCarthy entitled ‘DEFCON 1: Be prepared, a price war may be coming’ warned that supermarket profits could be hit hard if Clarke decided to cut hard in order to win back sales at the expense of profits. 

Accounts filed for Asda at Companies House this week showed Asda continued to outperform its peers in terms of profits in 2015, but the protection of the bottom line saw sales plunge by almost £1bn in 2015.

Turnaround plan

Parent company Walmart has made it clear it is unhappy with Asda’s performance and determined to take action. On the recent Goldman Sachs Global Retailing Conference Call, Walmart EVP and CFO Brett Biggs said Walmart had thought hard about “the right mix” for Asda in terms of profits, sales and cash flow. ”We have a sense of urgency about ensuring that Asda is successful,” he said. ”They’re going to focus on what you would focus on, which is the fundamentals of retail: it’s a pricing; it’s how your store is operated; it’s merchandising.” 

We have a sense of urgency about ensuring that Asda is successful

Brett Biggs, Walmart EVP and CFO

There were several improvements that could be made, Biggs added. ”Our pricing has got to be sharp, private label quality has got to be fantastic,” he said. “We’ve always had good private label at Asda, and that’s how you have to compete with the discounters.”

He also hinted Asda may focus more on ‘retailtainment’ in its stores in the future.