Asda Names Creative And Media Agency Partners

 

Asda has appointed Lucky Generals and Spark Foundry as its creative and media agency partners following a pitch process.

Advertising firm Lucky Generals will be Asda’s new creative agency partner for both its supermarkets and its George fashion & home brand.

The struggling grocer noted that it had been impressed by the agency’s ideas to show how Asda can deliver on its key mission of “delivering uncompromised value for hard-working families”. Lucky Generals will begin transitioning into the role in May.

Meanwhile, Asda is retaining Spark Foundry as its media agency, continuing an eight-year partnership.
“We set off on this journey to ensure we have the right partners in place to support Asda’s objectives to offer uncompromising value to our customers and with a key focus on the ‘Asda DNA’ that really resonates with our customers,” said Adam Zavalis, VP of Marketing at Asda.

“We are really pleased to have identified Lucky Generals as our new creative partner whilst retaining Spark as our media partner and look forward to working together to bring Asda’s personality to life for our customers.”

Cressida Homes-Smith, the CEO at Lucky Generals, added: “This is a pivotal moment for two of Britain’s greatest consumer champion brands – brands that deserve to be right in the heart of the nation at a time when things in Britain are genuinely tough.

“We love the palpable sense of energy, enthusiasm and determination the Asda and George bring, and there has been a natural and positive relationship between us since the very first meeting. We’re genuinely grateful for the honour and opportunity and can’t wait to get our sleeves rolled up and put these brands back where they belong.”

NamNews Implications:

• Asda now needs to hit media hard & fast…
• …in what will hopefully be a ‘re-education’ of its public…
• …given that a ‘new-education’ message would probably take longer than Asda has available.
• Fingers crossed…

Tesco Expected To Post Strong Annual Results And Address Asda Price War Challenge

Tesco is set to reveal strong sales and profit figures when it releases its annual results on Thursday, with investors keen to hear how the UK’s leading grocer plans to respond to Asda’s drive to slash prices to become 5% to 10% cheaper than its rivals.

Last month, Asda’s Chairman Allan Leighton said that the business was prepared to take a significant hit to its profit to finance a shift to a new low ‘Asda Price’ by the end of 2026 in a bid to recover lost market share. The statement led to shares in Tesco, Sainsbury’s and M&S tumbling on fears of a major supermarket price war.

However, most analysts think that scenario is unlikely, noting the increasing cost pressures retailers and their suppliers face. Recent industry data from Kantar shows that grocery price inflation in the UK rose slightly to 3.5% last month, with shoppers turning to promotions to save money.

Market watchers have also questioned whether Asda has the financial firepower for a sustained price war, given that its majority owner, private equity group TDR Capital, is not putting additional equity into the business.

Meanwhile, Tesco and Sainsbury’s have stronger balance sheets than Asda.

Tesco’s results “will be an important staging post to test the mood music of the market leader on such matters, we sense a mature, resolute and professional approach will ensue,” said renowned Shore Capital analyst Clive Black.

Analysts at Bernstein looked at over 500 own-label products that Tesco price matches with Aldi and compared them with Asda. “Tesco and Aldi do not massively need to react. They are winning on price perception,” it found.

Tesco has guided for an annual retail adjusted operating profit of around £2.9bn, up from £2.76bn last year, supported by robust sales growth in its core business.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Growth in the UK and Europe helped to offset declines in its wholesale business, Booker. It’s a competitive space, but its improving proposition saw Tesco record its highest market share since 2016. Investors will be keen to see this trend continue when it reports full-year results.”

Analysts expect Tesco to flag further profit growth in next 12 months despite costs (higher national insurance contributions, national minimum wage, new packaging levy.

NamNews Implications:

• The added uncertainties of Trump tariffs…
• …gives retailers the ’excuse’ to wait and see outcomes.
• i.e. postpone any plunge into a UK price war, if intended.
• Besides, whilst Asda management may have permission to make threats…
• …this may not include the funding of a prolonged price war.
• Meanwhile, retailers with strong balance sheets may now want to preserve their ‘wealth’ following Trump’s announcements.
• This says a lot: “Tesco and Aldi do not massively need to react. They are winning on price perception”.

Cost Of Asda’s IT Upgrade Set To Exceed £1bn; Looking At Moving Some Jobs Abroad

The cost of Asda’s troubled IT upgrade is set to surpass £1bn this year, adding more pressure to the business as it embarks on a turnaround plan that includes substantial investment in reducing its prices.

According to The Sunday Times, the troubled supermarket recently told bondholders that it was spending a further £175m on Project Future, a programme to separate its technology systems from its previous majority owner, Walmart. It told lenders this project had already cost £900m since 2021.

Disentangling Asda’s IT infrastructure from the US retail giant has been plagued by delays. Walmart recently agreed to push back its February 2025 deadline for the project, which prevented Asda from being hit with a multimillion-pound penalty.

Asda has said that the costs of Project Future would be significantly lower this year as the programme is finally concluded.

The retailer recently announced another round of price cuts as part of a move to shift its entire offering to a new low ‘Asda Price’ by the end of 2026, with the aim to be 5% to 10% cheaper than its rivals

Asda’s Chairman, Allan Leighton, said earlier this month 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”.

A separate report by The Telegraph over the weekend suggested that Asda is drawing up plans to shift some jobs abroad as part of moves to cut costs so it can invest in its price Rollback campaign and store improvements.

The retailer is said to have launched a consultation that could involve 26 jobs being cut across its customer service team and shifted overseas. Those affected are understood to be in Asda’s social media department, which is responsible for fielding questions from shoppers on sites such as X.

The newspaper noted that the proposal, which has not yet been finalised, echoes a similar move by Asda last year when it outsourced more than 100 IT staff to an Indian-based supplier.

An Asda spokesperson is quoted as saying: “As more customers choose to engage with us in different ways, we are proposing to make some changes to our online customer services team to support this changing dynamic.

“We have opened a consultation with a small number of colleagues affected should this proposal go ahead, and our priority is to do all we can to support them during this process.”

NamNews Implications:

• Asda management must sometimes refer to the old IBM maxim: ’It’s Better Manually’
• Seriously, £1bn added to their other issues must be a continuing distraction.
• Asda are taking all the obvious steps.
• And managing stakeholder expectations.
• With the best team possible.
• Fingers crossed…

Asda Chief Customer Officer Exiting After 18 Months

As Asda pushes forward with its turnaround strategy, David Hills is stepping down from his role as Chief Customer Officer.

He joined the business in September 2023 from Aldi, where he was Group Director of Marketing and Communications. At Asda, he was part of the team that revived the chain’s Rollback scheme, which is a key part of the ailing supermarket’s plan to win back shoppers from its rivals.

According to trade publication Retail Week, Hills is leaving to join airline and holiday company Jet2 amid a wider shake of senior staff members at Asda.

An Asda spokesperson is quoted as saying: “Earlier this year, David Hills informed us of his decision to join Jet2. David will remain with Asda until later this year and we will announce his replacement shortly.”

Last week, the retailer announced another round of price cuts as part of a move to shift its entire offering to a new low ‘Asda Price’ by the end of 2026, with the aim to be 5% to 10% cheaper than its rivals

Asda’s Chairman, Allan Leighton, said earlier this month 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”.

Meanwhile, Asda announced yesterday that its staff will receive an above-inflation pay increase of 4.7% in three phases, taking rates from £12.04 to £12.60 per hour. Hourly rates for workers inside the M25 will rise to £13.82.

Hayley Tatum, Chief People Officer at the supermarket, said: “We’re proud to have invested more than £500m in retail pay over the last four years. Our colleagues are what makes Asda special, and this latest pay investment, plus an increased colleague discount and enhanced family-friendly policies, recognises the key role they play in serving customers each day.”

NamNews Implications

• Worth assuming that a search for a replacement has been underway ’since early this year’.
• And it will probably take at three months to fill the role, at least!
• Meanwhile, Asda NAMs will have to find ways of covering the gap by adding more customer management rationale to their side of the interface.
• (i.e. driving customer loyalty, customer acquisition and customer retention).
• Unless they prefer to leave that opportunity for a rival…?

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’?

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?)

Asda Avoids Fine Despite Missing The Deadline For IT Upgrade

Asda has avoided a hefty penalty charge despite missing a target for separating its IT systems from former owner Walmart.

According to The Telegraph, the US retail giant has agreed to push back the deadline for the £800m project, which has seen Asda untangling thousands of programs responsible for checkouts, administration and payroll.

After being acquired by TDR Capital and the Issa brothers in early 2021, Asda had been aiming to complete the IT changeover, named Project Future, by February this year. Last month, industry sources warned that Asda risked millions of pounds worth of charges if it missed this target.

The Telegraph reported over the weekend that Walmart and Asda have now come to a revised agreement, including scrapping the February deadline. It follows a series of setbacks for the project, which had been touted as “mission critical” to Asda’s revival plans.

A spokesperson for Asda told the newspaper: “We continue to make good progress delivering Project Future and have successfully migrated large parts of our business to brand-new systems.

“We will continue to take a pragmatic approach when delivering the remainder of the programme, and Walmart continue to be incredibly supportive in every way in helping with the implementation.”

NamNews Implications:

• Meanwhile, given that their IT systems still need adjusting…
• …suppliers (and shoppers) may wonder about the effect on service level…
• …and react accordingly?

Asda Trialling Automated Sampling Machine

Asda has begun testing an automated vending machine that offers free samples to customers at its store in Pilsworth, Bury.

In report a report by trade publication The Grocer, the supermarket described the machine as a “first to market innovation” that could “revolutionise in-store sampling”.

To access a free sample, shoppers have to scan their Asda Rewards loyalty app. A screen on the machine also allows customers to browse ingredient and dietary information.

The first brand testing the new machine is Müller, which is offering shoppers free samples of its Frijj milkshake.

A spokesman for Asda told The Grocer: “We are trialling a digital sampling machine at our Pilsworth store so that customers can try newly launched products from our branded partners simply by scanning their Asda Rewards ID.”

Access to the machine is being offered by the supermarket’s retail media arm, LS Eleven Media Services, and aims to help brands “engage customers with dynamic content and product trials”.

NamNews Implications:

• If only Asda was not saddled with other distractions…
• i.e. we have seen some very original ideas coming from this beleaguered grocer…
• Anyway, key for suppliers in appropriate categories to ensure their access to these sampling machines.

Private Equity Giant KKR Mulling Bid For Asda

According to The Sunday Times, the US private equity giant, whose past investments include Alliance Boots, is working with former Asda boss Tony De Nunzio on a possible approach. He is now a senior adviser to KKR and the report suggested he would become Chairman of Asda in the event of an acquisition. [more for NamNews readers]

• From a NAMs-eye-view, the issue is the probability of new private equity-based majority ownership of Asda…
• …meaning sale & leaseback of outlets.
• …P&L by outlet…
• …all adding up to finance-based buying…
• …quite apart from an Amazon wanting to buy an inexpensive Sainsbury’s via the petty-cash box…

Walmart needs to cut Asda loose

An interesting article published earlier this year by Bloomberg sets out why Asda should be sold off:

Aldi & Lidl have eliminated Asda’s low price advantage, resulting in falling like-for-likes, with Asda’s sales growth trailing the other mults… (graphs in the original article really spell it out).

NamNews readers will be aware that Asda has been underperforming and thus diluting Walmart’s performance in terms of ROCE and Net Margin since its acquisition in 1999.

Normally, Walmart would have solved these problems by a combination of organic growth and acquisition of say Sainsbury’s or Morrisons, but UK planning legislation limits the building of new stores and competition legislation prevents acquisition of sizable competition.

This leaves sell-off as the only option for their UK operation.

Bloomberg estimates that Asda would be worth £8bn based on current market valuations of the other mults (i.e. @ 40% of sales).

The UK, in current competitive circumstances (Discounters, large space redundancy, seismic-shifts, ‘Brexit’ currency impact…, you name it!) would be unattractive for global players, given the probable purchase price and the need to justify the move to their respective stock markets.

This leaves private equity.

In which case, we enter a whole new ball-park, where the emphasis would shift to optimising the asset-base (stores) and financial performance (ROCE), in a 5 year time-frame leading to flotation….

This would provide a new basis for NAMs in their dealings with Asda:

• Emphasis on quantifying cost & value in all aspects of the supplier-Asda trading relationship (Margin, Credit, rotation, trade investment, NAM-advice, and deductions)
• Relating trade investment directly to Asda P&L

…and all within a 5 year window….

Publicis - Walmart's New Primary Agency of Record

According to yesterday's NamNews, Walmart has entered into what is being described as a strategic partnership with Publicis Groupe that will give the retailer “unfettered access” to all of the holding company’s agencies and resources.

In practice this means Publicis becomes Walmart's Primary Agency of Record i.e. an advertising agency authorised by an advertiser to buy advertising space and/or time on its behalf.

More than that, it gives Walmart access to all agency resources, globally, in managing Walmart’s US advertising and in-store creative giving the retailer access to resources outside of marketing, including capabilities to support corporate reputation and technology that builds relationships with customers.

In other words, think state-of-art, uniform, co-ordinated, creative  management of all communication with customers..

Add whatever it takes in terms of deep-cut EDLP to regain and maintain market share, big time, and you have a new dynamic in the market..

Asda has to be part of this…

More here

Time for NAMs to conduct some what-ifs in exploring the impacts on their categories…?  .

Black Friday: running the endgame numbers?

Whilst Black Friday presents a useful promotional and media sales surge, deep down business does not like spikes...

Asda's decision to pass on this occasion, indicates that retailers are beginning to check the numbers and are realising that Black Friday may not be worth the trouble (and cost...).

According to The Telegraph, bargain-hungry Britons are expected to spend £1.07bn on online shopping alone during Black Friday, up from £810m last year, quoting Experian-IMRG.

However, UK retailers stand to lose £130m just from handling returns of items bought on Black Friday, according to the retail intelligence company Clear Returns.

In addition, costs related to lost margins, cleaning and storing, oversupply of stock and the lost value of future custom from the shopper add a further £50m to the returns bill.

In other words, unless suppliers and retailer-partners have integrated Black Friday into a fully costed omnichannel strategy, that yields acceptable returns for the risk - think stock-shortages caused by returns-system lock-in, for a start - it is inevitable that next year other retailers will acknowledge Asda's financial pragmatism and sit this one out...

Time for suppliers to explore alternative initiatives aimed at spreading the promotional effect into a more manageable demand profile?