Rival Supermarkets Could Be Given Permission To Challenge Plans For New Aldi And Lidl Stores

The traditional supermarket multiples could be granted fresh powers to open more stores in areas dominated by Aldi and Lidl.

The Telegraph: The Competition and Markets Authority (CMA) is reviewing the rules that restrict major supermarkets from blocking their rivals from opening stores nearby.

To protect competition for shoppers, the regulator’s restrictive land clauses mean supermarkets must allow rival stores to open nearby without opposition.

However, this order only applies to Tesco, Sainsbury’s, Morrisons, Asda, Waitrose, Marks & Spencer and Co-op. Aldi and Lidl are exempt, meaning they have been able to grow their number of stores without having to comply with the rule.

Under the regs, the 7 UK supermarkets are blocked from having contractual clauses in their store deals, blocking rivals having stores in the same area. All of them have been forced to review contracts to comply with the order, which the CMA said is designed so that “shoppers have more choice and so benefit from a wider range of groceries and access to cheaper prices”.

Supermarket bosses have become increasingly frustrated over what they claim is an unfair playing field with Aldi and Lidl, not subject to the same restrictions based on 2010 legislation

Discounters hold nearly 20% of UK grocery market and both plan hundreds more stores.

The report said that Aldi and Lidl have been using the same restrictive clauses to block competitors from opening stores near them in retail parks.

Richard Walker, the Executive Chairman of Iceland, said last year that the discounters were using “legal tricks” to prevent rivals from moving into out-of-town shopping parks.

Officials have been asked to consider whether the rules should now include Aldi and Lidl or whether they should remove the bans for all supermarkets.

Supermarket insiders told the newspaper that they were hopeful that the competition regulator would decide to axe the restrictions altogether, given Labour’s push to cut red tape.

A CMA spokesperson is quoted as saying: “The Groceries Market Investigation (Controlled Land) Order plays an important role in maintaining competition between supermarkets, which is crucial to the finances of families across the country.

“We are aware of concerns that the Order should cover more supermarkets due to changes in the groceries sector, and we always keep this under review to ensure a level playing field.”

NamNews Implications:

• Inevitable that the government/legislation trails behind market realities.
• Inevitable that discounters’ growth in market share would reach this point.
• Inevitable that this planning clause includes discounter contracts…
• …to avoid the free-for-all that would inevitably result from removing the bans for all supermarkets.

Aldi Hits British Supplier Target Earlier Than Expected

Aldi has met its long-term commitment to increase spending with British suppliers.

In 2020, the discounter pledged to spend an additional £3.5bn a year with British suppliers by the end of 2025. However, it announced today that it has already surpassed this target, spending more than £14bn with UK businesses in 2024.

Giles Hurley, Chief Executive Officer of Aldi UK, commented: “British suppliers have always been at the heart of our business. From homegrown apples to Wagyu beef, and from crisps to cocktails – our range is full of incredible British products sourced from our amazing suppliers right here in the UK.

“We remain committed to buying British wherever we can, and surpassing our annual spending target ahead of schedule is a testament to that. By working closely with British businesses, we continue to champion local suppliers and support the UK economy.”

Last year, Aldi signed a 20-year agreement with family-owned fruit farm A C Goatham & Son in Kent to create a 200-acre Aldi Orchard to supply the chain’s entire core range of British apples. And last month, the discounter revealed that it had signed a new contract worth around £320m over the next five years with Yorkshire-based beef supplier Warrendale Wagyu.

Hurley concluded: “Hitting this milestone early is a proud moment for us and for the thousands of British suppliers we work with. Their hard work and dedication are what helps us deliver great quality and value to our customers every day.

“As we look ahead, our British suppliers can know that we’ll continue to stand alongside them – just as we have for the past 35 years.”

Aldi is celebrating its 35th year in the UK this weekend, having made its debut on 5th April 1990, opening a store in the Stechford area of Birmingham.

NamNews Implications:

• Given that the future of UK retail is much about Retail Media...
• ...in turn based mainly upon optimising the use of brands' First Party Data...
• ...brand suppliers should prepare now for Aldi’s inevitable move towards a 50/50 brand-surrogate label balance.
• As the discounter remodels its business to optimise the potential of Retail Media...

hashtag

Supermarkets Ramping Up Promotions; Aldi Achieves Record Market Share

According to the latest data from Kantar, take-home sales at UK grocers increased by 1.8% over the four weeks to 23 March compared with a year ago, marking the slowest rate since June 2024. Grocery price inflation rose slightly to 3.5% over the same period, with shoppers turning to promotions to save money.

“With prices continuing to rise, supermarkets are mindful of the need to invest to attract shoppers through their doors,” said Fraser McKevitt, head of retail and consumer insight at Kantar. “Promotional sales ramped up this month to 28.2% of total grocery spending, the highest level we’ve seen in March for four years.”

The data shows that retailer price cuts were responsible for £2.6bn of promotional spending, 8.8% more than the same time last year and significantly higher than the £686m spent on multibuy deals and ‘extra free’ offers. McKevitt added: “Despite the recent surge, we’re still some way off the promotional records hit in the wake of the financial crisis. Average spending on deals in 2012 was 39.8%, meaning there could still be more headroom to go. However, the market has changed a lot in that time, with the discounters holding a far higher share today than they did 13 years ago.”

Kantar noted that retailers battling to deliver value will be welcome news for households who remain worried about their financial situation. A recent survey by the research firm found that while the number of people reported as financially struggling has fallen from its peak of 27% in October 2022, this still accounts for almost a quarter (22%) of the country. “The rising cost of groceries ranks third on the list of concerns keeping consumers awake at night, just behind energy bills and the country’s overall economic outlook,” said McKevitt.

Despite financial concerns, consumers are still finding ways to treat themselves. Last month, sales of chocolate eggs and seasonal confectionery reached £134m, and over a third of households bought hot cross buns, even though Easter isn’t until late April.

As Aldi prepares to celebrate the 35th anniversary of its first store opening in the UK on 5 April, its share of the grocery market hit 11.0% for the first time over the 12 weeks to 23 March. This was up 0.3 percentage points from last year after its sales grew by 5.6% – the fastest rate for the discounter since last January.

Lidl’s sales rose by 9.1%, taking its market share to 7.8%, 0.4 percentage points higher than a year ago. It attracted 385,000 more shoppers last month, more than any other grocer, and saw a double-digit rise in footfall.

Ocado was again the fastest-growing grocer, a position it has held for the last 11 months, after its sales increased by 11.2%. For the first time, the online retailer took a 2.0% portion of the market. Spending on groceries at M&S increased by 13.1%, on top of M&S goods sold through Ocado.

Tesco saw spending through its tills rise by 5.4%, nearly half a billion pounds more than the same period a year ago. The UK’s largest grocer made the biggest share gain, with its portion climbing from 27.3% to 27.9%. Sainsbury’s reached 35 consecutive periods of year-on-year growth, with sales up by 4.1% as it grew ahead of the market. Its share nudged up to 15.2%.

Despite its turnaround efforts, sales at Morrisons were up only 0.6%, and its market share slipped to 8.5%. Meanwhile, Asda’s price rollback campaign appears not to have yet had a significant impact on its performance, with its market share declining to 12.5% after a 5.6% fall in sales.

NamNews Implications:

• The key standout is the Tesco-Sainsbury’s-Aldi-Lidl growth in market share, largely at the expense of Asda and Morrisons.
• Moreover, increases in sales performance across the board is being ‘bought’ via price promotion.
• With possibly more of the same as Autumn Budget tax increases now begin to bite in April.
• Suppliers need to anticipate the probability that retailers will now want (need?) them to share some more of the promo-cost of encouraging uncertain shoppers to spend.
• Any reluctance by brand owners runs the risk of more consumers turning to own label alternatives…

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…?

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’?