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Shoppers quit private equity grocery giants: Asda and Morrisons in reverse

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Shoppers quit private equity grocery giants: Asda and Morrisons in reverse after buyouts as Aldi heads for ‘Big 4’

  • Third and fourth-biggest grocers losing ground to rivals Tesco and Sainsbury’s 
  • Also they are haemorrhaging shoppers to Aldi and Lidl 
  • Findings raise questions over private equity ownership of leading supermarkets

Shoppers are deserting private equity-owned supermarkets Asda and Morrisons because the cost-of-living crisis bites. 

Britain’s third and fourth-biggest grocers are losing ground to larger rivals Tesco and Sainsbury’s, industry figures show. 

Also they are haemorrhaging shoppers to Aldi and Lidl as hard-pressed families look for tactics to chop the fee of the weekly shop. 

And in a development that can rattle the brand new owners of Morrisons, the Bradford-based grocer is ready to lose its spot within the ‘Big 4’ of Britain’s leading supermarkets to Aldi. 

The findings raise questions over private equity ownership of two of Britain’s leading supermarkets. 

Asda was bought by the billionaire Issa brothers and London private equity house TDR Capital for £6.8billion in 2020 while Morrisons was snapped up by Clayton, Dubilier and Rice for £7billion last 12 months. 

The most recent figures from data company Kantar show Morrisons brought in sales of £2.9billion within the 12 weeks to June 12, a 7.2 per cent drop on the identical period a 12 months earlier. Sales at Asda were down 4.8 per cent. 

In contrast, revenues at Tesco fell by just 1.1 per cent while Sainsbury’s sales were down 3.9 per cent. Heading in the opposite direction were Aldi and Lidl, where sales were up 7.9 per cent and 9.5 per cent respectively. 

The report showed Morrisons’ overall share of the market has fallen from 10.1 per cent a 12 months ago to 9.6 per cent while Aldi now commands a 9 per cent slice, up from 8.2 per cent. 

Analysts predict Aldi will dislodge Morrisons from its position within the Big 4 behind Tesco, Sainsbury’s and Asda. 

Independent retail analyst Richard Hyman said it was now a matter of ‘when, not if’ Morrisons falls behind Aldi. 

Shore Capital retail analyst Clive Black said: ‘It is not fanciful to suggest that by 2023 Aldi will likely be the fourth-biggest grocer within the UK.’ 

The differing fortunes of leading grocers will fuel fears private equity barons are usually not good stewards as the fee of living mounts. 

Asda and Morrisons have been accused of pushing up prices faster than rivals as inflation soars, and experts say the heavy debt piles picked up during their takeovers give them less flexibility to soak up increasing costs. 

Hargreaves Lansdown analyst Susannah Streeter said: ‘The discount grocers are snatching more customers from Morrisons and Asda, which appear to be falling behind within the competition to chop prices since being bought out. 

‘They went on a price offensive in April but as they face an ever tighter squeeze with costs mounting as they carry heavy debt loads, it is going to be rather a lot harder to search out room for fresh rounds of price cuts.’ 

Black said the brand new ownership of Morrisons and Asda is an element of the decline of their sales and market share. He said: ‘They’re profit maximisers and are clinical money flow people. Whether or not they are getting the sums right between sales and margins, time will tell.’ 

Morrisons was saddled with £5.6billion of debt while Asda’s buyout was funded with £4billion of debt. Firms House filings show Asda has paid £375.1m in interest on debt used to fund the deal. 

Hyman suggested Asda’s woes are usually not brought on by debt, but by an exodus of senior leadership. It has lost its chief executive Roger Burnley and recently replaced finance boss John Fallon after lower than a 12 months within the job. 

Morrisons held on to chief executive David Potts and has not had an exodus. Hyman said its hiccup was ‘a bit more worrying’. 

Asda pointed to figures from The Grocer magazine showing its prices rose just 0.3 per cent prior to now 12 months, while inflation runs at 9.1 per cent. The figures showed Morrisons’ prices rose 12.3 per cent over the 12 months. Morrisons declined to comment.

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