Asda gives rivals more headaches

Archie Norman is a man in a hurry. Not, as some unkind critics would have it, to secure a safe parliamentary seat, but to achieve lasting results for the supermarket chain which he heads. His encounter with the book trade was a bruising but well-judged piece of brinkmanship. His assault on the more powerful pharmaceutical industry shows a similar sureness of touch.

We need look little further for evidence than the riposte of Whitehall Laboratories, on discovering its brand Anadin was about to be delisted. The claim that some independent pharmacists will go out of business if Asda manages to break resale price maintenance is highly tendentious, to say the least. It’s also irrelevant: they will go out of business anyway. Contrast this with Norman’s withering condemnation of a 280m brand-tax in the basic health aids sector and the Anadin-maker’s position seems feeble indeed.

But Norman’s success depends on more than a few well-timed populist initiatives to curry favour with the beleaguered consumer. And the latest results from AGB Surveys seem to prove the point. Asda’s market share in packaged groceries – the margin-challenged core of supermarket business – has grown an astonishing 1.4 per cent in the four weeks ending June 2. Note that Sainsbury’s lost half a point and the City’s current darling, Tesco, grew only 0.4 per cent during the same period.

What this tells us is that forging ahead is not necessarily about expensive loyalty schemes la Tesco (though Asda, like everyone else, is certainly looking into these). True Tesco may have won the propaganda battle against Sainsbury’s. A raft of marketing initiatives, from Clubcard to financial services, compare favourably with Sainsbury’s pitiful market share figures. Not to mention the supreme humiliation of the Reward Card’s appearance.

But let’s not get over-excited. Tesco’s position has been leveraged mainly by an acquisition: the William Lowe chain. The longer-term results of its bold marketing experiment have yet to be judged. Market share has gone up, but so have overheads.

Nor should Sainsbury’s be underestimated simply because it is going through a bad patch. It was right to question the wisdom of engaging in a financial bleeding match with Tesco, even though a deteriorating position subsequently forced it to follow suit with the Reward Card. The BA initiative is further robust evidence that Sainsbury’s has stirred from its complacency.

Ultimately, however, Archie Norman’s unsophisticated but effectively communicated championing of the consumer may be the winning formula.

Sainsbury’s, page 7; Asda, page 9; George Pitcher page 25.

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