The shakeup, coupled with the strategies of Asda's competitors, makes the UK market unclear for grocery suppliers, who must cope with the buying power of the four dominant groups. Tesco, the marketleader, is being aggressively pursued by Asda, Sainsbury's and the Safeway/Morrison groups hold an 80 per cent share of the UK market.
Somerfield, the fifth largest chain, is currently considering offers in the £1bn range from a consortium of investment firms and from London & Regional, a property group. The Guardian newspaper today speculated that Asda may join the consortium after the Baugur Group, a retailer in Iceland, was forced to drop out this week due to legal issues.
The supermarket chain Asda could be interested in replacing Baugur in the consortium, the Guardian reported, claiming that the chain had attempted to join the bid several months ago but wasrebuffed.
Asda spokesperson Nick Agarwal told FoodProductionDaily.com that the Guardian story was "just speculation".
In Asda's latest announcement president and chief executive officer Andy Bond said the 200 management jobs will be phased out over "the coming days" at the company's Leeds andLutterworth centers in northern England as roles are merged. The management structure at its 265 stores will be simplified, he said.
The strategy is designed to improve Asda's underlying performance in the market over the next 12 to 18 months. Bond said the company will also "bring back proven talent" andrestructure its headquarters to "simplify the business". Each store in the chain will also recruit about eight staff for frontline customer service roles. The plan will create 1,200jobs.
As part of the restructuring, Angela Spindler has been given a newly created role as customer and strategy director. She will maintain responsibility for marketing, format development and businessstrategy.
In May Asda said that its quarterly operating profits had been below expectations after a "challenging" period limited sales growth to the low single digits.
In 2005 Asda plans to open at least new stores throughout the UK, creating another 5,000 new jobs and adding one million sq ft net of new sales space. As reported earlier inFoodProductionDaily.com, ASDA is in the process of purchasing 12 Safeway stores in Northern Ireland.
In addition to its food stores, Asda has diversified into other merchandise business as part of its strategy. The chain was purchased by Wal-Mart Stores six years ago and is the US retail giant'smain foothold to the European market.
The UK grocery market was worth £119.8bn in 2004, a growth of 4.2 per cent over the previous year according to IGD Research. The research firm forecasts that the market valuewill rise to £133.5bn by the end of 2009, with much of the growth attributable to inflation.
IGD predicts that development of the UK grocery retail market will continue to be restricted by a combination of slow population growth, price competition and growth in thefoodservice sector as an alternative channel.