Asda’s food ‘not good enough’

Asda’s food is not good enough – words from Andy Clarke – Asda’s CEO this week.

I don’t think you can dispute the facts with continuing loss of market share, internal sales plunging and an inconsistent store delivery ranging from good to utterly tragic.

I ask you, what is ‘not good enough’ for the UK’s number 2 retailer? The Grocery Insight blog takes a look:

Not Being Number One: Wal*Mart are reportedly not happy with the slow encroachment into Tesco’s virtually unassailable market share, despite huge investment (cash) by Wal*Mart into Asda, new stores and refurbs. The company still is nowhere near Tesco’s 30% and hasn’t built on its overtaking of Sainsbury as number 2 (food) in 2004. The revised target is clear number two in food (leading JS by 0.8%) and number one in non food.

There are several reasons for the lack of market share growth – aside from the fact that Asda’s food is not good enough

Resurgence of rivals: Morrison’s’ needed someone like Marc Bolland to sharpen up marketing and let operations take care of itself, with that enhanced reputation amongst customers after the huge marketing effort, Morrison’s recent performance has been stellar to say the least, they continue to grow ahead of the market with their focus on fresh being unrivalled. Dalton Philips evidently will have his own ideas but with IT and systems upgrades, the chink in the armour is to be repaired and Morrison will have systems for the 21st century.

Many analysts would have tipped Sainsbury to struggle with the recession with their higher priced own label food and the (inaccurate) perception that they are really expensive. Sainsbury’s movement with their switch&save campaign highlighting the strength of their own label (Asda’s big weakness) was a masterstroke and ensured that they kept customers who may well have looked at other supermarkets. Their store standards are much improved and they are now at the top end of the scale for availability which pre 2004 was their Achilles heel for so so long.

As we look to exit a recession and avoid the double dip, Sainsbury’s muted growth should become louder as consumer confidence grows, spelling bad news for Asda with both of their resurgent rivals turning up the heat.

Store availability:

Asda is lagging behind their rivals for in store availability, although recently improved it still lags and key times (early morning, late afternoon) there are issues with out of stocks and gaps which frustrate shoppers into going elsewhere. If you go into a store even later then you’d be lucky to get 50% of what you need. Compared to the other big three it’s not good enough and customers will vote with their feet, although statistically Asda perform well (Grocer 33 and the like) the reality is that falling market share and sales indicates an issue with availability.

Asda’s food is not good enough remember, however, availability remains weak regardless.

The Offer:

Confusing. EDLP is Asda’s cornerstone, ‘saving you money every day’ and the like. However it’s not enough in the UK, we judge value by price but also quality. If we didn’t Aldi and Lidl would have far more market share and the basics / value brands would be the most popular.

Asda’s food isn’t good enough. The Extra Special range is good but until recently you couldn’t see it on the shelf in it’s cream livery, it’s new plum packaging gives it distinction but such is the quality of the standard own label means you are unlikely to get customers trying the Extra Special range as there isn’t the credibility there (as Clarke said).

The offers are another point for confusion, Asda has won the Grocer33 for 13 years now so obviously competes on price to retain its crown. You almost get tired of seeing ridiculous errors on SEL’s, 97p – 3 for £3, rollbacks that mean the multi buy is worse value. It confuses customers and reduces the trust a customer has in the brand, these errors shouldn’t leave Asda House.

Similar story with the multi buys that represent brilliant value but require a customer spending £4 for example, Asda’s customers benefit from a half price / rolled back price rather than a x for y requiring a higher spend. Many customers at Asda will shop on a strict budget and can’t afford the £4 even if it represents superb value.

What to do?

These are challenges Andy Clarke will face head on, the store operational side of things is likely to improve and be sharpened up, I’ve already seen POS displaying the specific offers in stores such as ‘half price’ which can only be a positive move to clear up the sometimes confusing nature of the promotions that Asda run.

There is also the matter of appointing a Chief Operations Officer to replace Clarke himself when he took the CEO’s job which should see more direction from the strategy side of things.

A replacement for Darren Blackhurst was appointed today with Wal*Mart veteran Charles Redfield taking the role, a Wal*Mart lifer and well respected throughout the US will add a good pair of hands to the top team and it’s interesting to see whether Asda go internally (UK) for the COO job or if they turn to the Wal*Mart talent pool again.

Finally, a good piece of advice is ‘stick to the knitting’ – Sticking to what you are good at, Asda should recall they are a food retailer first and foremost and you live and die by the quality of your food.

Morrisons were thought of as having poor quality fresh food for years by people that didn’t shop there, post Marc Bolland, they are ranked first for fresh by many customers. Bolland didn’t change the operations, he just advertised what they had always been doing.

Secondly, they should recall a quote above some warehouses that lead to the shop floor – ‘stock it, and they will come’ – Sales look after themselves if the shelves are full and whilst Asda’s food is not good enough, a better own label offer is compelling enough to attract customers.

Most recovery strategies focus on going back to basics these days, Asda’s will be no different.

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Grocery Insight provide market insight on the UK sector with a focus on individual retailers and the wider market too.

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