Asda boss Allan Leighton says the supermarket will refuse to put through cost price increases even if there is a flood of requests from suppliers, promising it will act as the “gatekeeper” for low prices.
Leighton today announced what he claimed were “green shoots of recovery” at the struggling supermarket giant, despite it reporting like-for-like sales down 3.1% in the first quarter, with revenues falling 5.9%.
However, Asda’s executive chairman said its turnaround strategy has begun to carve out a price gap with its full-range rivals, and had been making “striking progress” on improving availability.
Avoiding inflation
Leighton claimed Asda was standing out from its peers by not passing on cost inflation to customers, saying it has now moved more than 10,000 products to lower prices under its Rollback strategy, which he claimed had created a 3%-6% price gap over traditional supermarkets.
Leighton has set out a target of Asda being between 5%-10% cheaper than its rivals including Tesco, and said he believed the rise of inflation could be an “opportunity” for Asda.
“We are not putting cost price increases through at the same rate as everyone else, we are holding back,” he said.
“We think it is an opening for us. Value and price has never been as important as it is for shoppers today, and as we open up that price gap that will make us a piece of distinction in the marketplace.”
This week mounting fears were raised about the threat of inflation, including from Asda’s own income tracker, which revealed households had experienced a decline in spending last month as inflation rose to its highest level in 15 months.
Meanwhile the BRC has warned of a new “surge” of inflation in the autumn.
However, Leighton told The Grocer he was determined Asda would not pass on a wave of price increase requests.
“We have to question when suppliers come in with floods of requests for price increases,” he said. “We’re the gatekeeper for those prices and we are managing to do that.
“You can’t say you stand up for customers and then not do that because CPIs are coming through.”
Shrinking market share
Leighton insisted Asda’s stance was resulting in a rise in sales volumes, despite the latest figures from Kantar this week showing its share of the UK grocery market had slipped to a record low. Asda’s market share fell to just 12.1% in the 12 weeks to May 18 – its lowest level since Kantar began tracking the data in 2011.
However, Leighton insisted Asda was “mining the gap” on price to carve out an advantage over its rivals, although it had a “long way to go”.
He claimed Asda had achieved “really striking” improvement in availability, with its level going from “sub-90% to 95% in a very short space of time” due to what he called “much better depot pick accuracies”.
Leighton also added that Asda was where he expected it to be on its turnaround on prices, but ahead of target on improved availability.
Asda has faced questions over its turnaround, with The Grocer revealing last month it had been keeping products at ‘Rollback’ prices for far shorter periods than suggested in its communications around the campaign.
The Grocer also revealed once those products have been removed from the promotion, the supermarket has also been putting them back up to their pre-Rollback price, or even higher in some cases, rather than selling them at a permanently lower price as promised.
Leighton has strongly defended the Rollback campaign and today he said Asda would “stick to what we’re doing” and “would not be knocked off course”.
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