Five months ago, discussions in the supermarket industry centered around potential price wars, particularly as Asda, led by former executive Allan Leighton, aimed to regain its position as a price leader among grocery chains. Asda’s owners, private equity firm TDR Capital and the remaining Issa brother from a 2021 leveraged buyout, pledged significant financial resources to reverse declining sales, even accepting a reduction in profit for the upcoming year to stimulate growth. This competitive shift raised concerns for other major players, including Tesco.
Recent data from market research group Worldpanel indicates a different story. Tesco and Sainsbury’s have performed well, while Asda and Morrisons, burdened by buyout debt, faced continued challenges. Asda reported sales declines for the 15th consecutive month, with its market share dropping from 14.8% at the time of the buyout to 11.8%. In contrast, competitors like Sainsbury’s, holding steady at 15%, and Aldi, growing to 10.8%, have maintained or increased their market presence.
The financial strain of buyout debt appears to limit Asda’s ability to engage in aggressive pricing strategies against better-capitalized rivals. Unlike Tesco and Sainsbury’s, which have the option to adjust share buybacks for additional borrowing, Aldi and Lidl operate under substantial international backing, offering them long-term advantages in market competitions.
Although Allan Leighton has indicated that a successful turnaround at Asda might take three to five years, questions arise about the long-term viability of Asda’s position in the market. Efforts to stabilize sales may be aided by an £800 million investment in IT systems.
While the initial concerns about Asda reviving competition for Tesco and Sainsbury’s seem unrealistic at this point, the original leveraged buyout strategy employed by Asda’s owners might still yield positive outcomes if the company can achieve stabilization. However, sustaining a serious price war may necessitate new equity investments, posing further risks for stakeholders.
Source: https://www.theguardian.com/business/nils-pratley-on-finance/2025/aug/19/asda-is-still-misfiring-in-supermarkets-non-existent-price-war