Credit Suisse says that Asda is set to become the most influential actor within the UK's food retail sector this year.
The claim follows on from the retailer’s CEO, Andy Clarke, announcing in January that it would cut its prices by £500 million, there has been clear evidence of that plan in action.
From September 2015 to February 2016, a sample weekly shopping basket put together by trade publication The Grocer, showed that Asda’s prices were 3 per cent lower than those of the rest of the UK’s ‘Big Four’ (Tesco, Sainsbury and Morrisons).
Over the last five weeks, this figure has fallen again to be 8 per cent lower than the average shopping basket price.
According to Credit Suisse, this pricing will drive volumes, which in turn will drive operational leverage and margins.
It adds that if other grocery retailers follow Asda’s price lead to protect volumes sales, gross margins will decline.
However, if they allow Asda to open a pricing gap, their volumes will fall while net margins decline.
© 2016 European Supermarket Magazine – your source for the latest retail news. Article by Jenny Whelan. To subscribe to ESM: The European Supermarket Magazine, click here.
