More Price Cuts At Asda

 Asda has announced another round of price cuts as it battles to win back shoppers after a prolonged run of dismal sales performance.

The latest reductions cover 1,500 “family favourite products” and means its renewed Rollback initiative launched in January has spread to 10,000 products – almost a third of Asda’s entire range.

The latest cuts are across multiple categories and include a 44% reduction in the price of Philadelphia Soft Cheese (165g), a 34% cut in Nestlé Munch Bunch (340g), and a 34% drop in the cost of Head and Shoulders (2 in 1 – 330ml). The reductions also include own-label lines such as Asda Little Angels Nappies, down 16%.

Earlier this week, the value of shares in Tesco, Sainsbury’s and Marks & Spencer fell by a total of around £4bn amid fears that Asda will sacrifice profit in a grocery price war to win back market share.

After announcing year-end results last Friday, Asda’s new Chairman, Allan Leighton, noted that he had “a pretty significant war chest” to tackle several years of weak trading at the supermarket. He also promised “a big investment” in the business even though it would “materially reduce our profitability this year”.

The retailer plans to add thousands more products at regular intervals to its Rollback scheme in order to move its entire offering to a new low ‘Asda Price’ by the end of 2026. Leighton has said that the aim was for Asda to be 5% to 10% cheaper than its rivals, though regaining customers’ trust would take time.

Commenting on the latest round of cuts, he said: “Last week, we signalled again our absolute commitment to lowering prices for customers, and today, we’re further delivering on that promise. By rolling back prices on thousands more products, we’re making it even easier for our customers to save. Nearly 10,000 products have now been rolled back, and we will continue to invest in lowering prices across the rest of the year and beyond.”

NamNews Implications:

• For anyone harbouring any doubts re Asda intent
• “a pretty significant war chest”
• “a big investment”
• “materially reduce our profitability this year”.
• This says it all..
• i.e. Asda are going to the wire
• Be warned…

Morrisons Shaking Up Trading Team As Part Of Plan To Relaunch Market Street Concept

Morrisons is reported to be overhauling its trading team as it prepares to relaunch its Market Street proposition as part of its growth strategy.

According to trade publication The Grocer, the supermarket’s new Group Trading Director, Andrew Staniland, who joined from Iceland last month, is leading the shake-up.

This has involved a consolidation of its category buying teams, with five layers of reporting being reduced to three.

Morrisons stated that the move has led to the creation of more than 10 new roles, including three director roles. It is believed that some category director roles will be merged into heads of trading areas, while buyers will now also be known as traders.

The shake-up is also said to include the introduction of monthly virtual supplier updates.

The report by The Grocer noted that a key part of Morrisons’ turnaround plan is to create the ‘Market Street of tomorrow’, with its Chief Executive Rami Baitiéh having earmarked the concept as a point of difference to its rivals.

Staniland told The Grocer: “Since I stepped through the door a few weeks ago it was clear to me we have a very capable team and a golden opportunity to make some magic at Morrisons.

“I’ve been listening hard to our customers, colleagues and suppliers and learning a great deal about where we are and what we need to focus on – and the plans are coming together really well now.”

NamNews Implications:

• ‘Creation of more than 10 new roles, including three director roles’...
• ...means suppliers should reassess Morrisons’ account management structures to reflect probable changes in decision-making process.
• And deep down, attempting to assess the impact on individual supplier category mix.
• Meanwhile, their intent to create the ‘Market Street of tomorrow’ is worth attention…

Billions Wiped Off Value Of Leading Supermarkets Amid Fears Of Asda-Led Price War

The value of shares in Tesco, Sainsbury’s and Marks & Spencer has fallen by a total of around £3.5bn since Friday afternoon amid fears that Asda will sacrifice profit in a grocery price war to win back market share.

Tesco took the biggest hit; its share price was down 10% by lunchtime today, while Sainsbury’s slipped 8%, and Marks & Spencer’s fell 7%.

The drops came after Asda said its profits were likely to fall this year as it invested more in cutting prices and overhauling its operations to tempt shoppers back to its stores.

Analysts stated that it was likely that Tesco and Sainsbury’s profits would be squeezed by having to lower prices to compete.

Frederick Wild, a retail analyst at Jefferies, said it was clear that “market conditions are changing rapidly”, meaning the value of the listed grocers was likely to remain under pressure in the short term. “We would be more sceptical of any grocer found to be flat-footed in this changing environment,” he added.

However, Wild said it was “far from clear whether Asda has the ability to commit to the scale of cuts outlined on Friday if volume growth does not improve measurably in the coming weeks and months”.

Asda’s new Chairman, Allan Leighton, said on Friday he had “a pretty significant war chest” to tackle several years of weak trading at the supermarket.

In January, he reintroduced the ‘Rollback’ promotion of the 1990s. With an average reduction of 25% across 4,000 products, Rollback has now been expanded to roughly a quarter of Asda’s entire range, with it planning to add thousands more products at regular intervals to move its entire offering to a new low ‘Asda Price’ by the end of 2026.

Leighton told reporters at the end of last week that the aim was for Asda to be 5% to 10% cheaper than its rivals, though regaining customers’ trust would take time.

Clive Black, the head of research at Shore Capital, said Asda had made a “clear and necessary indication of intent to invest in the price and proposition” but this was “set against a sceptical and reluctant supply chain”.

He said he was holding profit predictions for Tesco and Sainsbury’s at present. “Irrational contagion [on price cutting] lowering gross margin and earnings is the greatest concern, but we need to remember too that the listed players are better grocers than Asda with a broader customer set, stronger balance sheets and a will to remain competitive, too,” Black added.

NamNews Implications:

• We are now entering ‘who blinks first?’ territory…
• One consequence has to be consumer reaction:
• “How can they afford a 25% average price reduction (when operating at a loss)?”
• Moreover, retailers that follow Asda may be subject to similar accusations.
• All leading to distrust of the retail brand…
• …with a knock-on impact on share prices.
• ...as Asda could be entering the ‘last chance saloon’?

Aldi Voted ‘Supermarket Of The Year’ For Wine

Aldi has beaten off competition from Waitrose and Co-op to be named ‘Supermarket of the Year’ for wine at this year’s People’s Choice Drink Awards, which took place earlier this week.

The discounter won the gold medal after receiving the greatest number of public votes, with its own brand Pierre Jaurant Côtes De Gascogne white wine also recognised within the ‘Mindful Drinking: Light and Easy’ category, taking home a silver.

Aldi noted that success has been fuelled by its customer-centric approach and responsiveness to consumer trends, developed in direct response to shopper demand.

Julie Ashfield, Chief Commercial Officer at Aldi UK, commented: “We’re thrilled to receive this award for our wine range, showcasing our commitment to offering exceptional value without sacrificing quality. Thank you to our customers for recognising our dedication.”

NamNews Implications:

• Stakeholders might benefit from reminding themselves of how far this ‘impertinent discounter’ has come…
• …on its 35-year UK journey
• ...in this sophisticated UK market
•  (With you or without you?)

Unilever To Increase Spend On Social Media Marketing And Accelerate Pace Of Food Brand Disposals

Unilever’s new Chief Executive has revealed that the business is planning to recruit more social media influencers to market its products because consumers are “suspicious” of corporate branding.

According to the Financial Times, Fernando Fernandez told Barclays analyst Warren Ackerman in an interview last week: “Messages of brands coming from corporations are suspicious messages,” adding: “Creating marketing activity systems in which others can speak for your brand at scale is very important.”

He said Unilever was switching to a social media-first advertising model, increasing its investment on such platforms from 30 to 50% of its total advertising spend. The company has increased its overall marketing spend from 13% of turnover in 2022 to 15.5% in 2024.

In the past, Unilever has attracted the ire of investors for overemphasising brand “purpose”. Its marketing approach has typically associated its products with wider purposes, such as Hellman’s mayonnaise tackling food waste or Dove soap denouncing toxic beauty standards.

However, the FT noted that the tactic has lost traction i.e. consumers have increasingly turned to online influencers instead of corporations for recommendations.

“There are 19,000 zip codes in India. There are 5,764 municipalities in Brazil. I want one influencer in each of them,” Fernandez said. “That’s a significant change. It requires a machine of content creation, very different to the one we had in the past.”

Meanwhile, Fernandez told Ackerman they were sticking to his predecessor’s plan to only carry out bolt-on acquisitions and would accelerate the pace of disposals of smaller regional food brands.

“Every brand in our portfolio, every category has to earn the right to belong in our portfolio,” Fernandez said, adding: “Time will say what we do with our portfolio in the long run, but that’s the position at this stage.”

Analysts and investors have suggested that Unilever’s food business no longer fits with the rest of the company’s faster-growing product portfolio.

While Fernandez did not rule out a separation of the entire food portfolio, he said the division’s two leading brands – Knorr and Hellmann’s, 60% of the business – were accretive in margin and cash generation. “It’s a very attractive business, it gives us a lot of flexibility. And we are committed to grow that business. That’s what I can say about food now,” he said.

NamNews Implications:

• On this, the fifth anniversary, it could be said that trust was the biggest casualty of Lockdown…
• With consumer “suspicion” of corporate branding an example of the damage at brand level.
• Third-party recommendations patently can have more pulling power with consumers.
• And given its potential reach, in the right hands, social media is becoming more powerful.
• i.e. this Unilever change has to be a pointer for others...

Asda’s Chairman Pauses Search For CEO As He Makes Progress With Recovery Plan In A Race Against Time

Asda has “paused” its long-running search for a Chief Executive as new Chairman Allan Leighton implements his turnaround plan for the struggling supermarket.

Asda has now been without a permanent CEO since the abrupt departure of Roger Burnley in August 2021 and Mohsin Issa stepping back late 2024.

In an interview with The Times last week, Leighton said: “I’m going to take another couple of months to see what it is we need.

“It’s very important to get somebody, and to get a team, that is going to be here for the next 5, 7, 8 years".

He added: “It is about getting the range right, getting the price right and getting the availability right. And we’ve got to win the hearts and minds back of our people. Why we are where we are is largely self-inflicted.”

Key steps:

• Revival Asda’s Rollback price-cutting campaign
• Restore a price 5 -10% price gap
• Ban Red signage
• Restore 98.5% availability vs 90%

However, he warned that it will take three to five years to fully restore Asda

Re Asda Finances: “Last time we put out our numbers, we had a billion of cash on the balance sheet. The last two or three years, we have probably generated £600m to £700m of cash flow. I’m not at all worried about it. What is our leverage? Three times. We have got £8.5bn of assets.”

A separate report by the Telegraph suggested that Asda’s high level of debt is putting pressure on executives to consider cashing in on the company’s sprawling property portfolio. In 2023, the company’s owners started looking into the sale and leaseback of various properties to help combat soaring interest bills on the debt.

Newsteer, which has been advising Asda on the latest land sales, recently issued a note to potential developers saying the supermarket had identified “surplus space” at stores in Slough, Reading, Burgh Heath near Epsom, Tilbury in Essex and Cardiff. Newsteer stated that developers could convert the car park land into new homes or shops that would sit next to the existing Asda supermarket.

A spokesperson for Asda is quoted by The Telegraph as saying: “It’s common practice for national retailers with large property portfolios like Asda, Tesco and Sainsbury’s to explore how best to make use of surplus land in their property estate. Prospective parties interested in these sites are advised to contact Newsteer.”

NamNews Implications:

• Asda is in a race against time…
• And ‘cutting’ can be the fastest approach.
• Meaning selling least profitable stores until a profitable estate remains.
• Meaning the use of store sell-off proceeds to pay down debt, thereby cutting the interest burden. 
• Meanwhile, cutting prices to a point that restores Asda’s relative competitive appeal and encourages profitable repeat sales.
• (never forgetting the PE exit strategy…)
• i.e. back to a race against time…

Asda Axing Bonus Payouts For Managers

Asda is reported to have told thousands of senior staff they will not receive their bonuses after a year of declining sales and market share.

According to The Telegraph, more than 10,000 managers have been told that they will not be rewarded with payouts owing to the supermarket’s faltering performance. Typically, managers expect to receive bonuses in the first three months of each year.

The newspaper noted that the bonuses are being axed just months after Allan Leighton returned to the retailer as Chairman, pledging to restore what he calls the “Asda DNA”.

The Telegraph stated that while slashing the bonuses could help fund price cuts that are part of Leighton’s turnaround plan, it is likely to hit already low morale on the shop floor.

A former senior Asda employee said: “Morale will be rock bottom. Even Allan won’t be able to pick them up from this. This will mean some of the top talent looking elsewhere.”

Fewer than half of workers said they were confident in Asda’s strategy in the supermarket’s most recent staff survey. It has also recently faced criticism from union chiefs over how it was making job cuts at its head office without forewarning.

One recruiter told the newspaper that the move on bonuses could lead to “anarchy” within the company. Senior managers are eligible for Asda’s bonus scheme and around 10% of its 134,500 employees received the award last year.

News that they will miss out this year comes just weeks after Leighton unveiled his first round of job cuts as part of a restructuring of its senior teams.

Leighton has warned that it could take as long as five years to revive the supermarket.

Clive Black, an analyst at Shore Capital, noted the new Chairman had injected “new energy”, but said what Asda needed was “a proper overhaul of the group’s engine, not just a 12-month service”.

Leighton is also under pressure to improve performance at a time of looming cost increases across the industry. Black said: “Costs are about to go a whole lot higher, with EPR [Extended Producer Responsibility scheme, a recycling levy], National Insurance and the National Living Wage.”

NamNews Implications:

• Morale impact:
• Good guys leave
• And those that cannot…
• And with the big cost increases yet to hit…
• i.e. EPR, National Insurance, National Living Wage
• (Meanwhile, the good guys apply to Aldi/Lidl?)

Aldi Outsourcing Head Office Jobs To Lower Wage Countries

Days after it was reported that Aldi UK is consulting over proposals that could see up to 350 roles cut at its head office in Atherstone, it has been revealed that the move is linked to the discounter outsourcing roles to lower-wage countries, rather than as an immediate reaction to impending tax hikes.

According to sources quoted by trade magazine The Grocer, Aldi has been outsourcing jobs in finance, human resources and buying, with a focus on administrative roles. The report stated that the discounter had been planning to outsource the roles to lower-cost third-party companies in Eastern Europe and India for about two years before news of the restructuring at its head office broke at the end of last month.

Commenting on the 350 job cuts last week, a spokesperson for Aldi said: “To support our continued growth and to offer the best experience to our customers, we are consulting over proposals to restructure some Head Office teams.

“No customer-facing roles are affected, and no final decisions will be made until the consultation process is complete. We are committed to supporting our colleagues throughout this process. Wherever possible, we will seek to redeploy affected colleagues within the business.”

Yesterday’s report by The Grocer said Aldi has not commented on outsourcing the roles.

In recent weeks, Sainsbury’s, Tesco, and Morrisons have all announced job cuts in the wake of the government’s decision to increase employer national insurance contributions and the minimum wage from April.

NamNews Implications:

• As anticipated, Aldi are cutting costs.
• And outsourcing, where practicable, has to be an option…
• …especially for a global organisation.
• With any savings reflected in shelf prices….
• …which means increased appeal of the Aldi offering.
• Unless we are missing something?