Asda assures ‘no pressure’ on farmers despite price cuts
© Tim Scrivener Asda has pledged that its aggressive price-cutting strategy in stores will not put pressure on its farmer-suppliers.
The supermarket chain, which has launched a price war in a bid to boost sales and regain market share, has assured suppliers that the cost reductions will not affect them.
A source close to Asda confirmed: “This investment in price is being funded from company cashflow.
“We have a substantial war chest to deliver a sustained, long-term investment in lower prices for customers.”
See also: Labour MPs accuse supermarkets of unfair practices
The move follows a significant dip in Asda’s sales and a subsequent drop in the company’s market value.
Asda, which is owned by private equity, saw a 5% decrease in sales in the 12 weeks leading up to late February, a stark contrast to the 5.8% and 4.8% increases reported by Tesco and Sainsbury’s, respectively.
This has led to a £4.4bn loss in market value for its rivals, including Tesco, Sainsbury’s, and Marks & Spencer, as investors anticipate the impact of Asda’s aggressive pricing strategy on the entire grocery sector.
Despite this, Asda’s executive chairman, Allan Leighton, is adamant that the company’s focus is on regaining customer loyalty, especially among busy, price-conscious families.
He explained: “Everyone is focused on making Asda the number-one choice again.
“This is what’s driving all of our actions across pricing, ranging, merchandising, and every part of the business.”
The supermarket chain’s price reductions have already been applied to thousands of popular products, with plans to expand its Rollback programme to cover a quarter of its entire range.
Price gap
Asda intends to open up a 5-10% price gap with its competitors, which analysts expect to follow suit with their own reductions.
Shares prices in major retailers including Tesco, Sainsbury’s and Marks & Spencer have tumbled since Asda’s price cutting announcement, with Tesco taking the biggest hit (down 18% in a month).
While Asda is facing significant financial challenges, including a debt of £3.8bn at the end of December, the company’s leadership is confident these price reductions will help restore its competitive edge over the long term.
This includes a 4p/litre reduction in the price of petrol and diesel at all Asda and Asda Express forecourts, providing further savings for customers.
Asda faces backlash over reversal of British poultry pledge
The NFU is urging retailers to uphold their sourcing commitments after Asda reversed its pledge to source 100% British poultry.
Asda had previously committed to stocking only British chicken in its fresh poultry lines, alongside other major retailers.
NFU Poultry Board chairman James Mottershead expressed disappointment at the change but said Asda has assured the NFU this is a temporary issue.
The NFU says it will continue to monitor the situation and push for retailers to maintain their promises, stressing that it’s crucial to foster confidence in the British poultry sector amid ongoing challenges faced by farmers.