Sainsbury's knocked by Asda - and by competition inquiry

J Sainsbury was dealt a double blow yesterday after industry figures showed Asda had pushed it into the number three slot in the UK supermarket league and its efforts to expand were hampered by a competition probe.

Wal-Mart-owned Asda, which has been snapping at Sainsbury's heels for the past year, saw its market share soar past its arch-rival in the four weeks to 20 July, according to data from Taylor Nelson Sofres, the market research group.

Buoyed by sales of non-food items, Asda's market share rose to 17 per cent, while Sainsbury's slipped to 16.2 per cent. Both remain well off Tesco which controls 27.2 per cent of the market.

TNS, which compiles the figures based on till-roll data, said the figures were part of a "clear long-term trend" showing "consistent growth" from Asda over the past 10 years, with decline from Sainsbury's over the past six years.

"We all knew it was coming. But it will be bad for Sainsbury's morale," one retail analyst said.

Sainsbury's total market share slipped by 9 percentage points from 17.1 per cent, while Asda's increased by the same amount. Sainsbury's, which is struggling to convince the City that a three-year recovery programme costing an estimated £2bn is working, is re-launching its non-food ranges this autumn.

Sir Peter Davis, its chief executive, admitted last week that he was dissatisfied with the group's recent like-for-like sales, which rose by just 0.3 per cent in the 12 weeks to 21 June. This compared with a 5.8 per cent gain at Tesco.

TNS data showed that Sainsbury's position looks healthier based on food sales, where its 15.5 per cent market share is comfortably ahead of Asda's 13.3 per cent.

Separately, the Government revealed it had referred a possible bid from Sainsbury's for a parcel of Somerfield stores to the Competition Commission. Sainsbury's had asked the Office of Fair Trading for advance clearance to buy 171 Somerfield outlets in the event of a bid for its smaller rival. But the OFT said local competition would suffer as a result. Sir Peter said he was "disappointed" with the outcome.