Asda puts pressure on rivals as food sales soar

Asda yesterday illustrated the increasing dominance of the UK's big four supermarkets by announcing that its sales were growing at twice the average rate in the UK food sales sector. Britain's third biggest supermarket behind Tesco and Sainsbury with 11 per cent of the market, became the latest of the big four to report a rise in market share, increasing fears that second-tier players such as Kwik Save and Somerfield were being squeezed out.

Andrew Fowler, an analyst at UBS, said: "The superstore is becoming increasingly powerful. Too many people think the issue is about how much share Tesco or Sainsbury or Asda has. But the real story is what happens to number five and six in line as the market consolidates."

Figures by AGB, the market research group, show that the top four supermarkets including Safeway had 58.3 per cent of the food sales market in April this year compared to 55.6 per cent at the same time in 1996.

Archie Norman, chairman of Asda and the recently elected Conservative MP for Tunbridge Wells, said yesterday that the group was growing sales faster than any of its rivals. "The business is continuing to perform on track and on schedule. The pace of change is as great as it has ever been."

Asda's like-for-like sales grew at 9.2 per cent in the year to the end of May compared to 7.5 per cent at Tesco and 3.2 per cent at Asda.

Mr Norman said that Asda had no plans for diversification into areas like financial services. "We are not investing in loyalty cards, home delivery, banking in Ireland. We are only doing one thing. We want to be shopkeepers."

Allan Leighton, chief executive, said that the costs of developing a loyalty card, which the company was trialling in 40 of its 213 stores, and financial services so far outweighed the benefits: "Our customers are more interested in pounds today than points tomorrow. We have the technology to launch a loyalty card. But the benefits are limited."

Mr Norman said Asda had no plans to expand its sales of televisions and videos as Tesco was planning to do: "We have been pulling out of electrical goods. We hope Tesco goes into the lot - televisions, fridges and washing machines."

However, Mr Norman hinted that with the appointment of Ian Robinson, chief executive of Scottish Power, as a non-executive director, Asda would consider selling electricity and organising customer billing. "We are still looking at it," Mr Norman said. He added that the group wanted to increase its healthcare services and was talking about developing in- store doctor's surgeries, as Sainsbury has done.