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Business News

Asda takes fight to big rivals with price scheme

The chief executive of Asda has refused to withdraw its controversial price guarantee, sending out a defiant message to its big rivals, which have been incensed by the scheme.

Andy Clarke said the Asda Price Guarantee – which promises that on a basket of comparable groceries the Walmart-owned grocer will be 10 per cent cheaper than four of its big rivals – had helped it to "outperform" the market and deliver like-for-like sales up 1.6 per cent, excluding fuel, in its fourth quarter. Asda's price guarantee, which was first introduced in April, has caused a storm, as the big grocers are engaged in a fierce battle to grab each pound from hard-pressed consumers.

But Mr Clarke ratcheted up the pressure yesterday by signalling the scheme, which was relaunched in early January, was here to stay.

He said: "We have not put an end date on it. If customers continue to tell us that they enjoy seeing that difference and we are growing our business because of it, why would I want to change it?" He added the "Asda Price Guarantee is a game-changer".

Under the latest version, shoppers are refunded £10 if they find their £100 basket is the same price at Tesco, Sainsbury's, Morrisons and Waitrose across nearly 15,000 grocery items listed by Mysupermarket.co.uk, the price comparison website. Customers who find their £100 basket for £95 elsewhere receive 10 per cent of the £95, in addition to the original £5 difference – equal to a total of £14.50.

Tesco was incensed by Asda's TV and press adverts, describing its claims to be 10 per cent cheaper as "utter rubbish". Morrisons and Sainsbury's also lodged complaints to the Advertising Standards Authority (ASA) over what they called misleading claims, saying that Asda excludes a large number of everyday items.

While the ASA partly upheld or upheld four of the nine complaints, such as Asda not making it clear the guarantee did not apply to non-food items, such as advertised World Cup deckchairs, the watchdog found its grocery claims were substantiated and accurate, allowing it to continue running them. After shoppers compared 1 million baskets over eight months to the end of December on Asda's website, the grocer said usage of its price guarantee was gaining momentum. A spokesman said: "The fact that 800,000 baskets have been compared by our customers since 6 January demonstrates its power and potential."

While this represent just 4 per cent of Asda's more than 18 million customers a week, the grocer stressed it was a price-checker not a loyalty card.

But a Tesco spokesman said: "This is the clearest evidence yet that Asda's price guarantee has fallen flat, with only a tiny proportion of their customers even attempting to use it in the six weeks since the relaunch." Tesco has 16 million Clubcard users.

For the year to 31 December, Asda grew profits and delivered like-for-like sales, excluding VAT, up 0.6 cent, although its performance improved in the second half. But Mr Clarke admitted that consumers were "worried" about job security and that Asda has seen a return to "round pound" purchasing, with consumers limiting themselves to spending multiples of £10 on petrol, for instance. Asda's staff will share a £26.9m bonus pot this Friday.