Where is Morrisons going right, as Asda is going wrong?

With all eyes on the sporting heroics in Paris, a Frenchman is playing a major role in an Olympian battle for UK supermarket share.

Since both were subject to high-profile private equity takeovers, Morrisons and Asda have faced turbulent fortunes.

At one stage, both were seemingly becoming laggards, but in recent months Morrisons appears to be fighting back under new CEO Rami Baitiéh, while Asda is struggling badly, with The Grocer this week revealing plans for a major store reset after it admitted store standards had slipped.

So what are Baitiéh and the Terry Leahy backed consortium CD&R doing that is working so well – and where have Mohsin Issa and his TDR Capital backers got things wrong?

Only 10 miles separate their head offices in Leeds and Bradford, but a bigger gap has emerged in the turnaround strategies and sales performance of the retailers. Asda is doing worse than any other major supermarket in Kantar’s latest monthly update, with its sales down 5.3% year on year, while Morrisons is in growth.

NIQ’s latest data paints and even more dire picture for Asda, with its sales down nearly 6% (see tables below).

Sources believe Morrisons’ stronger performance is in no small way due to former Carrefour boss Baitiéh, who replaced David Potts in November last year. He is said to have galvanised Morrisons with a back to basics approach that embraces the spirit of its founder Ken Morrison.

Leadership contrast

Just this week, Baitiéh was in Cornwall at the opening of a £12m sardines factory in Redruth – the latest sign of a lead-from-the-front approach which has seen him meet with staff on numerous store visits and wax lyrical about Morrisons’ 125-year history in addresses to workers.

In contrast, critics say Mohsin Issa has come across as “frosty” and “aloof” when meeting his troops.

Neither has Baitiéh ducked hard decisions. In January, he said Morrisons’ performance since the pandemic had simply “not been good enough.”

He went on to  quash speculation Morrisons might axe its Market Street proposition to fund price cuts. Instead, he set a “laser-like” focus on availability and loyalty.

As The Grocer reveals this week, Morrisons is now planning a major new drive to promote its More Card Prices in September, having already begun to make it a key weapon, in the vein of Tesco Clubcard and Sainsbury’s Nectar.

Just 18 months ago, the More Card was used in only 33% of transactions, a figure now up to almost 50%. At its supplier conference in Harrogate earlier this month, Morrisons told suppliers it had set a new target for 70%.

Meanwhile, Morrisons’ WIGIG range, which recently reached its 450th store, has taken a leaf out of the discounters’ book, as have the Aldi and Lidl price-matching schemes launched by both Morrisons and Asda early this year and, says Baitiéh, illustrates how it has rediscovered its “trading mentality”.

IGD retail futures senior partner Bryan Roberts says: “I think it’s fair to say that Morrisons have turned the corner.

“There’s more they can do on things like the loyalty card but Baitiéh has clearly overseen a culture change.”

Shore Capital analyst Clive Black says: “One senses that old fashioned store virtues like WIGIGS are working well.

“Baitiéh has brought a refreshing focus on addressing core customer complaints, whilst the big trading calls have also been the right darts: making the most of Market Street and vertical integration whilst seeking to both improve the wider offer and trade stores harder.”

The Grocer 33 tells its own story of the comparative performance of the two supermarkets. Morrisons ended the G33 year this month with its availability up from 91.1% to 92.5%, having bagged 12 store of the week awards, versus 10 the previous year. Nine of the 12 wins have been since Baitiéh joined.

In contrast, Asda managed a comparatively poor store performance, despite its traditional dominance on price. Its availability fell across the year from 91.4% to 90.3%, and while its average customer service score improved slightly from 54.8 to 55, this still left it in last place.

Asda own figures suggest shoppers are not the only ones who expect more. The Daily Telegraph this week revealed results of an internal staff survey showing fewer than half of workers felt confident in its long term strategic plan.

In recent months, Asda has faced strikes and protests by staff at stores in various parts of the country, co-ordinated by GMB over complaints including cuts to hours.

Asda has strenuously denied the union’s claims but a move this week to invest millions in staff hours seems an acknowledgement it must do better.

The ongoing dispute has not been a good look for Asda, not least the union’s latest tactic of parading cut-outs of TDR boss Manjit Dale outside stores to demonstrate anger over alleged “asset stripping”.

“Asda has got a real issue with its brand and its identity,” claims Nadine Houghton, GMB National Officer.

“It has lost that sense of being the retailer that is there for working class families. I represented Wilko workers when it went into administration and there are worrying similarities. The owners seem to have lost sight of what they stand for.”

Houghton denies the union action could be a self-fulfilling prophecy.

“If you were Asda, why wouldn’t you listen to what we are saying?” she says. “So many Asda workers are telling us it’s simply a dreadful place to work now because of the cuts to hours. There is a palpable sense of that when you walk into stores.”

“You have got the boss of Morrisons popping up all over social media, and we are told that when Mohsin Issa visits he doesn’t engage with staff.”

Asda claims the union exaggerates and that its motivation is more about lack of union recognition. But it admits the huge transformation required of the business after the takeover from Walmart has meant it has not been able to dedicate the resources needed to the core supermarket strategy, something it must put right fast.

“The business has been through a huge amount of change in the last 12 months, with the ongoing transformation of our entire tech stack through Project Future, to growing the business by over 400 sites,” says a spokesman.

“Each of these projects on their own would be a challenge for any business to navigate through, and moving through them all simultaneously has been a significant undertaking.”

The distractions have not gone unnoticed with suppliers, despite Issa’s insistence to The Grocer in April that relations were at an “all time high”.

“Asda do seem somewhat in disarray” says one. “Buyers are really difficult to get hold of and NPD is slow and painful.

“Morrisons, on the other hand, are focusing almost totally on sorting availability, which seems to be helping from a sales perspective.”

Senior vacancies

And whereas Baitiéh’s influence on Morrisons is clear, Asda is still searching for – and clearly feeling the absence of – a CEO, with the role vacant since Roger Burnley quit in August 2021.

Former Lidl COO Matt Heslop was recruited in June to run its stores and distribution network, including its 470-strong Asda Express division, but won’t actually start until January.

In July, Asda poached Iceland group buying director Andrew Staniland for a VP role, but he is not due to start until in March.

Also in July, former Morrisons retail director Gary Mills, who had been lined up to be interim retail director, pulled out after a change of heart.

That’s not to mention the fallout between the Issa brothers that finally saw Zuber Issa sell his stake to TDR in June.

“Asda has had a more unstable boardroom backdrop than Morrisons with the seeming split between the Issa Bros, leading to TDR Europe becoming the largest shareholder,” says Black.

“We do not believe this high-level change has been especially helpful to the attraction and retention of talent, nor the consistency of delivery in store.

“A well-executed loyalty and entry price offer was not seen through as board level instability took hold, and new leadership is necessary to take matters forward.

Read more:

• Will an Asda reset reclaim worker and shopper affections?

• How supermarkets are looking after their staff like never before

• Asda denies union claims as Wisbech staff call second strike

• Morrisons rolls out ‘when it’s gone it’s gone’ offer to nearly all supermarkets

Yet, as in politics, tables can turn quickly for supermarkets, and Asda’s vow to tackle store issues – and recruit a CEO – could see it stage a fightback.

“It’s important to note that the original investors in Asda have more than recouped their initial equity investment,” adds Black.

“TDR is a high-class act, long-term in nature.

“Asda is quite highly profitable, with a growing commitment to convenience and the UK’s number-two clothing brand by volume in George.

“Put another way, Asda would rather not be losing share, but it is not a busy fool.”

Morrisons can also claim to have significantly reduced its debt burden, not least via the sale of MFG in April for £2.5bn. It has also, like Asda, grown its convenience channel, and now has more than 1,600 c-stores.

So Morrisons may be winning the race, but more hurdles will come – and despite Asda’s woes, it is far too early to hand out a winner’s medal.