TV chef James Martin recently rustled up a strawberry gateau with Asda boss Andy Clarke at the InterContinental Hotel on Park Lane in London. The mini Bake Off event did not perhaps have the ratings of Martin’s former show Saturday Kitchen, but it cemented his new partnership with Britain’s number three supermarket.
The chain is hoping that the hunky Yorkshireman can do for Asda what Jamie Oliver’s cockney charm did for Sainsbury’s.
Things have been getting pretty hot in the kitchen of late for Clarke, as a resurgent Tesco and the rapacious growth of discounters Aldi and Lidl pick off Asda’s shoppers.
A newly media-shy Asda will report its first-quarter sales via American parent Walmart on Thursday, and recent industry data suggests the figures will be dire. The retailer’s market share has dropped from 17.3% two years ago to 16% today, according to Kantar Worldpanel. In the last three months of 2015, underlying sales tumbled by 5.8% at Asda after it lost the battle for Christmas shoppers.
To outsiders, Asda does look like a business in trouble, but Bryan Roberts of retail consultancy TCC Global says the company is focusing on defending its profitability rather than its market share. “Some of the other grocers have been renting market share,” he says. “Asda has won the price war – that’s clear – but what it now needs to correct is perception. It has to walk the tightrope of offering low prices to attract the value-conscious as well as the bells and whistles that attract the higher-income shopper.”
He adds that work needs to be done to improve the attractiveness of its sprawling superstores. “You can’t carry on losing market share on this scale for ever: you need to turn it around. It has to turn its mind to rejuvenating the proposition.”
Finding shoppers tiring of endless bogofs and multibuy promotions, rival grocers Tesco, Sainsbury’s and Morrisons have moved to offering customers everyday low prices (“EDLP” in industry jargon). It’s a model that was pioneered in Britain by Asda – thanks to the might of the Walmart machine, which enables it to secure low prices by placing huge orders with suppliers – but the market shift means there is now less clear blue water between it and the competition.
Asda has now embarked on “project renewal” – an overhaul of the business that this year will see 95 of its superstores refurbished. This will include handing over large chunks of space to other retailers, such as French sportswear giant Decathlon.
It is also pulling up to a fifth of its products off the shelves as part of a review of the 40,000 lines it carries. Tesco carried out a similar exercise last year in the face of customer defections to the low-cost, low-choice German discounters, which typically stock fewer than 2,000 products.
Analysts at Morgan Stanley argue that Asda is the industry’s wild card, and that if it chose to take a more aggressive stance on prices, it could put a serious dent in other retailer’s profits. “In a bear case scenario, where Asda decided to reset its margin, it could lead to a halving of the industry’s profit pool,” cautions Morgan Stanley’s Edouard Aubin.
That would be very bad news for Tesco. In the year to February, Tesco made an underlying profit of £944m. That was down from £4bn four years ago, and when he unveiled its full-year results, chief executive Dave Lewis was reluctant to be pinned down to a forecast for this year, amid tough market conditions.
According to Morgan Stanley’s monthly price survey of a 400-strong basket of goods, Asda appeared to have sharpened its prices in April, with its basket 4.5% cheaper than Tesco’s.
While Martin will start appearing in Asda adverts from June, the retailer is also calling on the talents of another Yorkshireman. Former Sainsbury’s retail and operations director Roger Burnley arrives in the autumn after a year of gardening leave. Burnley, who was part of the famous turnaround team led by Archie Norman and Allan Leighton that revived Asda in the 1990s, will rejoin as chief operating officer, but many believe that, come 2017, he will be the star turn rather than the co-presenter as Clarke bows out.
