Since the Issa brother’s takeover of Big 4 grocer Asda, it has made a plethora of bold moves across the entire organisation as they look to regain that 2nd spot position it lost to Sainsbury’s in grocery market share.
But, none of them has been quite as big, nor as important to its customers as the major overhaul Asda has planned out for the future of its budget range.
Asda’s current budget range, Asda Smart Price, can be traced back to the 1990s.
However, as ‘All things must pass’, the grocer decided to scrap its trusted range in favour of its successor, the ‘Just Essentials’ range. Not to be confused with Waitrose’s Essentials range – although that did cause quite a stir a couple of weeks ago – the new range is unmissable with its bright neon yellow packaging and will comprise over 300 products, 50% more than the Smart Price range.
According to Asda, it will be “the largest budget-friendly essential range on the market.”
The launch of the new budget line comes at the perfect time. With millions of people battling against the rising living costs, a new budget food line would help alleviate the pressures customers are experiencing.
On the other hand, you could question the timing of the launch. According to The Grocer, the speed of the rollout left suppliers ‘stunned’, some of whom have questioned whether it is possible to launch such a proposition with only a matter of weeks’ notice as according to ex-retailer Ged Futter, suppliers don’t get a say. “The suppliers do what the retailers want them to do,” he told Grocery Gazette.
The quick overhaul
The announcement for Asda’s new range came out on 25 March, with plans to start rolling out products in May, which gives suppliers and all other parties involved just over a month to get their products ready.
Retail expert and the director at The Retail Mind, Futter said in a blog post: “Do Asda actually believe that Suppliers have magic wands which they wave & things just happen? Where do they think the 300 new Just Essentials products will just appear from, in their depots at the start of May ready for a grand unveiling?
Additionally, April and May are littered with bank holidays which only reduces the number of days Asda and its suppliers have to prepare the Just Essentials range.
Futter continued: “The multiple retailers are like oil tankers, pointing them in a new direction is not something that can be done overnight.
“If you want a business that is nimble & fleet of foot then look away from the multiples. They have huge teams, often working on different projects that may be conflicting. Silo mentality rules.”
It is important to highlight that the ‘weeks’ deadline that has been prominent in retailing news outlets is slightly misleading.
“The launch of Just Essentials is phased, with the first products hitting shelves in May and the rest following throughout the summer, so any reports of the brand being ‘ready in just 4 weeks’ are vastly incorrect,” Asda spokesman Joe Furniss told Grocery Gazette.
Furthermore, Furniss clarified that Asda first briefed suppliers at the start of March, which gives them an additional four weeks of preparation time. With this taken into account, the launch of Asda’s Just Essentials range in May no longer looks like an impossibly daunting task for the suppliers, but it does not mean it is going to be easy.
Speaking to Grocery Gazette, Futter said: “There are still plenty of issues. I was speaking to appliance and what he actually said to me is that at the moment, getting hold of cardboard, which you need for the trays and things like that, can take 24 weeks.”
“That’s one of the problems that you have at the moment, the timeframes are just not on the scale with what Asda directors are expecting, and part of that is because of pressures on the supply chain.”
Asda’s right move?
As mentioned earlier, launching a budget line in this climate makes perfect sense. With prices going up – especially food, energy and fuel costs – it is important to have a range of products accessible to those feeling the squeeze of inflation.
“We understand that customers are increasingly worried about the cost of living and want help to keep their grocery bills in check, whilst still being able to buy healthy and nutritious food for their families,” Asda co-owner Mohsin Issa said.
“When we bought Asda we were clear that we wanted to grow this great business and our ambition is for Asda to regain its position as the UK’s second-largest grocery retailer.”
In addition, own-label products have seen an upswing in sales in the past couple of months, according to data reports from Kantar and NielsenIQ.
“Consumers are increasingly turning to own-label products, which are usually cheaper than branded alternatives,” Kantar head of retail and consumer insight Fraser McKevitt said.
“Own label sales are down in line with the wider market but the proportion of spending on them versus brands has grown to 50.6%, up from 49.9% this time last year.”
Not only will the Just Essentials launch be of benefit to Asda’s customers, the timing of the launch lines up impeccably well with current supermarket trends but, experts argue, from a business point of view Asda may be doing themselves a disservice.
Futter argued that the budget grocery market is dominated by discounter stores, and pulling customers away from stores such as Aldi and Lidl will be increasingly difficult.
“Aldi has spent 15 years talking about quality, they shout about British. Will 300 value products change what Aldi has spent over a decade-defining?” Futter said to Grocery Gazette.
“The area of high importance is mid-tier, this is where customers may move to from brands.
“That’s where they [Asda] need to be investing in more rather than on the value range.”
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Furthermore, despite the recent uptake in sales in own-label and budget lines, launching a huge new range in a climate that is currently experiencing supply chain issues and record highs in inflation, further exacerbated by the crises in Ukraine seems illogical.
Prices are forcibly going up in every supermarket. How does Asda plan on keeping its prices low and competitive with discounters considering the odds stacked against them?
Asda’s launch of its Just Essentials range could yet be a massive success. It could be the driving force that brings customers back into its store, driving up the supermarket’s sales which will see Asda clinch the second spot in the grocery market share away from Sainsbury’s.
But, as of right now, it leaves a lot to be desired. Launching a budget line suits the climate and difficulties Britons are experiencing, but, that market is dominated by discounters Aldi and Lidl, which are seeing their biggest growth since the 2008 financial crisis.
Additionally, launching a budget range at a time when inflation, war, and supply issues are all driving prices through the roof doesn’t seem to make much sense from the supermarket’s financial perspective. On top of that, the cardboard shortage and the short notice suppliers received will only escalate the prices.
This move by Asda might have been received kindly by shoppers and activists campaigning for cheaper prices, but Asda may have shot themselves in foot, leaving themselves and suppliers crippled and short-changed.