How the Wal-Mart deal will boost Asda

When Asda’s new marketing director, Richard Baker, takes up his post at the end of the month, it could be a very different kind of role to the one he envisaged.

Baker, a protegé of chief executive Allan Leighton, was plucked from Mars ­ where Leighton had also worked ­ in 1996 to be director of Asda’s home and leisure products unit. Leighton has groomed him for greater things, and his most recent job was as North-west managing director.

His appointment last week (MW June 10) was made when it was still assumed that Asda was to merge with Kingfisher. But this week’s £6.7bn bid for the supermarket chain by US retailer Wal-Mart seems, at first glance, to change the whole nature of Baker’s marketing role.

In truth, Asda has been copying the Wal-Mart style of retailing for many years, with its emphasis on low prices and headline-grabbing promotions. The merger is expected to lead to a round of price-cutting from Asda, possibly provoking a supermarket price war. But it is unlikely to increase Asda’s £30m ad budget ­ keeping down ad costs is a key part of any discount strategy.

Observers say the takeover will only make a real difference in the “invisible” areas, such as systems and IT, where Asda has lagged badly behind its UK rivals. The link with Wal-Mart will result in these being rapidly improved.

What the Wal-Mart deal will do is enable Asda to be bolder in its marketing, in the knowledge that it can source non-food goods from Asian markets, through Wal-Mart. Its grey market contacts in Asia will serve Asda well in stocking unofficial supplies of big brand jeans, perfumes and other products. But it may help Asda source official non-food goods as well.

Paul Smiddy, retail analyst at Credit Lyonnais, comments: “Marketing has waned in importance at Asda. When you are as committed to low prices as it is, marketing strategy is a relatively simple task.”

Smiddy argues that Baker’s role will involve little more than sourcing the next line of grey market goods to be offered as part of Asda’s substantial non-food offer.

Observers question how great a role Baker will have in the development of the “new” Asda, although his closeness to Leighton should serve him well.

He succeeds a line of marketing directors who are believed to have been ousted from the chain by non-executive chairman Archie Norman and Leighton. Baker is the sixth person to have held the marketing director role in four years.

In 1995, Michael Fleming left the company after just six months in the position, amid speculation he did not fit in with Norman’s ethos. In 1997, Gwynn Burr was sidelined in similar circumstances.

In both cases, Norman and then Leighton took over responsibility for marketing for extended periods before a replacement was found. This mirrors the situation since Baker’s predecessor Steven Cain left Asda at the beginning of the year to become chief executive of Carlton Communications. Leighton has filled in for him since.

David Stoddart, analyst at Henderson Crosthwaite, says: “Any time you take on a position where the boss knows the role better than you do, there is a risk of interference.”

Asda’s close relationship to advertising agency Publicis is unlikely to change in the short term, but the end of the Asda/Kingfisher deal will bring relief to Bates, which handles Safeway. Had the Kingfisher deal gone through, Bates ­ which also handles much of Kingfisher’s business ­ could have faced a review of the Safeway account as it would then have been seen as a conflict.

Given the lack of flexibility in Asda’s agency relationships and Asda’s low-priced positioning, there seems little scope for the new marketing director to exert his influence, especially once the all-conquering Wal-Mart takes over the chain.

Baker will have to keep in with Publicis, as the relationship has been forged at the top level between Norman and Leighton and the agency’s group chairman Rick Bendel.

Publicis has held the account since June 1989 and sources say Bendel has developed as a partner rather than a supplier to the business. One source says: “There was a running joke at Publicis about Bendel being on the phone every day to discuss the price of bananas.

“Anyone with any sense will have been briefed to get on the right side of him ­ I know of one guy who tried to do things his own way and was axed within months.”

Bendel refuses to comment on the issue but accepts the triumvirate formed by himself, Norman and Leighton is a formidable one. He says: “I have worked with Allan and Archie for a long time and we have a very strong working relationship.”

Luckily for Baker, Bendel has expressed his approval for the new man, who is also a favourite of Leighton. Bendel says: “Richard is the best man-manager in the business.

“We can only benefit from the Wal-Mart deal. It could be injecting large amounts of money in the business.”

So Baker may end up in a more senior position in the new Asda/Wal-Mart, or alternatively follow Cain into a senior management post in another company.

Either way, his immediate task will be little changed by the Wal-Mart move, and Asda’s marketing promises more of the same.


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