Asda Stepping Up Price Cuts And Range Revamp To Combat Discounters

 Namnews, 29th March 2021

Asda is reported to have been reducing prices and the size of its product range in recent weeks as it steps up its fight against the discounters ahead of the Issa brothers and TDR Capital taking full control of the business in the coming months.

According to The Telegraph, the chain has been cutting the prices of some ranges such as desserts and baking products with industry sources saying further reductions will follow. It added that some product ranges are due to be pared back by as much a quarter.

Before it was sold by Walmart, Asda told suppliers last year that it wanted to reduce its product range and focus more heavily on its everyday low prices (EDLP) strategy to help it win back shoppers from Aldi and Lidl.

Amid a tough economic backdrop for consumers, the new owners are said to want to step up the focus on low prices.

One Asda supplier told The Telegraph it was braced for extra price cuts as they expected the Issas to “try to save some money somewhere” and expressed concerns that food producers could be squeezed further.

Asda stated that its plans had been in the making for the last 12 months and “category transformation is a key component of our discount platform strategy”. It added that customers will notice “revamped categories with smaller, carefully-curated ranges and even better value on the products they buy the most.”

The retailer is also planning to introduce some new lines to deliver the right mix of products to meet customer’s needs.

Clive Black, a retail analyst at Shore Capital, is quoted as saying: “The Issas don’t have a culture of discounting, however, they’ve bought the superstore group with the strongest price value credentials in the UK.

“If you ask most shoppers what does Asda stands for, it will stand for price. If you ask them what Morrisons, Tesco and Sainsbury’s stand for, it’s a more nuanced response.

“Asda cannot afford to let that core trade go. Anyone leading Asda will want to make sure that their price credentials are in the right position.”

However, Black warned that the new owners could get the balance wrong if it discounts too heavily as the other grocers will have to retaliate.

The Issa brothers and TDR Capital completed the purchase of a majority holding in Asda from Walmart in mid-February with clearance from the Competition and Markets Authority (CMA) the only final hurdle. Asda is currently operating independently from its buyers whilst the CMA conducts its investigation, with a ruling expected by 20 April.

NAM Implications:

• Any shelf-price reductions need financing…
• (with supplier help?)
• Either way, price is a relatively easy way back for Asda.
• (with other mults unlikely to wait on the sidelines?)