Asda to put £1bn into lowering prices over five years

Asda plans to invest £1bn in lowering prices as it looks to close the price gap with the discounters.

Unveiling its Q3 results today, CEO and president Andy Clarke said that under a new five-year plan, “we will build on our heritage of low prices by rebasing our pricing to the tune of £1bn”. This would enable it to widen its price gap to the “big three” as well as closing the price gap to the discounters.

Asda would also invest £250m in improving the quality, design and style of its products and stores, said Clarke. It would look at “reinventing the format of large stores” and revamping categories such as health and beauty, added CMO Stephen Smith. The investments would be funded by Walmart and savings generated by Asda’s internal We Operate For Less programme.

“Any Asda convenience offering will keep to our price model and ensure that c-stores are not more expensive than supermarkets like the offer of some of our competition”

Andy Clarke

By the end of the five-year period, it also hoped to have a clearer picture of its convenience strategy, said Clarke. “I am conscious there is a £36bn convenience market that we don’t have a slice of,” he said. “Any Asda convenience offering will keep to our price model and ensure that c-stores are not more expensive than supermarkets.

“I don’t feel we are entering convenience too late as this five-year window will help us to determine how we can reinvent the convenience wheel rather than just offering more of the same.”

Asda is set to open 100 standalone petrol forecourts and increase the number of click & collect locations from 213 to 1,000 by 2018. With both geared towards the south east of England and London, Asda is looking to increase the physical access to its brand in the UK from 53% to 70% over the period.

Asda posted a 0.3% rise in like-for-like sales for the 13 weeks ending 4 October 2013, while its market share slipped 0.4 percentage points to 17.2%. Like-for-likes therefore slowed compared to the two previous quarters this year (1.1% in Q1 and 0.7% in Q2).

Meanwhile, online grocery sales grew 15% and non-food online sales increased by 20%. Asda said it was targeting £3bn in online sales by 2018.

Earlier today, it announced its entire workforce would share in a £17m Christmas bonus.

Blog: Asda’s five-year mission