Supermarket price war could bring consumers some relief but only because the government is pushing up costs

Published

2 months ago

March 18, 2025

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The air is suddenly full of talk about supermarket price wars.

Some £4.4bn was wiped from the stock market valuations of Tesco, Sainsbury’s and Marks & Spencer on Monday following comments from Allan Leighton, the executive chairman of Asda, on Friday in which he promised the grocer was planning its biggest price cuts in 25 years.

Mr Leighton, who returned to Asda last November, said there was a “war chest” available to Asda and indicated he was prepared to “materially” forego profits in the short term to win back market share.

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He told The Times: “We have a long way to go. We’re three months into what is going to be three years of really getting the basics of the business right and getting the business to outperform the rest of the industry on a like-for-like basis.

“That’s what restores our market share and profitability. It ain’t going to happen overnight.”

Those remarks are rightly being taken seriously by investors – by the market close on Monday Tesco shares had fallen by nearly 15% since Friday morning and those of Marks & Spencer and Sainsbury’s by 10% and 9% apiece.

That is because nobody, arguably, knows Asda better than Mr Leighton.

What’s gone wrong at Asda?

It was he, along with current Marks & Spencer chairman Archie Norman, who rescued Asda from collapse in the early 1990s before selling the business to US giant Walmart in 1999.

Initially, that transaction appeared to go well, with Asda wresting the number two slot in the UK grocery market from Sainsbury’s in 2003.

But Walmart’s insistence on preserving margins gradually saw its share eroded and the number two slot recaptured by Sainsbury’s.

By 2019, it was clear Asda was no longer regarded as a core asset by Walmart. That was the year an attempt was made, blocked by competition regulators, to merge the business with Sainsbury’s.

Worse was to follow.

In October 2020, Walmart offloaded a majority stake in the grocer to the petrol forecourts billionaires Mohsin and Zuber Issa and the private equity firm TDR Capital.

The debt taken on during the takeover blunted Asda’s competitiveness and resulted in it losing market share – mainly to Tesco and Sainsbury’s but also to the German hard discounters Aldi and Lidl.

It went through a series of managers before TDR Capital bought out Zuber Issa in June last year to take a majority 67.5% stake while Mohsin Issa, who retains 22.5% of the business, relinquished the day-to-day running of the business.

A new era

Cue the return of Mr Leighton.

Within weeks, after Asda was the worst-performing supermarket over the Christmas period, he had announced a ‘Big Jan Price Drop’ price-cutting campaign which saw average price reductions of 26% on selected products.

That was dismissed by rivals, most notably Ken Murphy, the chief executive of market leader Tesco, as not representing a genuine price war.

Mr Leighton’s response has been to reintroduce the ‘Rollback’ price-cutting promotions he and Mr Norman introduced in the 1990s in a bid to revive the spirit of the old ‘That’s Asda Price’ campaigns, complete with shoppers patting their back pockets, backed by heavy newspaper and television advertising.

It is being seen by industry experts as a wider price-cutting initiative than the more limited campaign Asda had been running to ‘price match’ Aldi and Lidl.

While the price cuts are the most eye-catching initiatives, so far as consumers will be concerned, Mr Leighton has also spent £43m on extending opening hours for some stores and has also bolstered his management team.

The most important hire was David Lepley, the group retail director at Morrisons, who was appointed in February as chief supply chain officer – a recognition that Asda needed to sharpen up on its product availability.

Can the new boss work his magic again?

The big question many in the industry have is whether Mr Leighton – who has since leaving Asda in 2000 had a spell as chairman of the Co-op – can work his magic again.

The grocery market now is very different from the one in the 1990s when Tesco was only in the foothills of the explosive growth it was later to enjoy, first under Lord MacLaurin and then under Sir Terry Leahy, while Sainsbury’s was going through a fallow period.

Morrisons, which acquired the old Safeway chain in 2004, was also a much smaller business than it is today.

Moreover, in the 1990s, the hard discounters Aldi and Lidl – who entered the UK in 1990 and 1994 respectively – had a miniscule market presence.

Hard discounting in grocery retail was also less developed than today with the old Kwik-Save chain its leading exponent.

In other words, the climate was ripe for a player like Asda to seize share with big, well-targeted price cuts, snappy advertising and, crucially, excellent product availability.

Compare that with today.

A different time

Tesco’s market position is as dominant as it has ever been while Sainsbury’s is a strongly entrenched number two in the market and a revived Morrisons, under Rami Baitiéh, has also returned to growth.

Aldi and Lidl, although the former has recently seen its market share slipping, also remain formidable competitors.

Tesco and Sainsbury’s, who have benefited more than anyone from Asda’s travails, have the most to lose in the event of a turnaround. But they are also better placed than anyone else to withstand one: Tesco’s Clubcard is arguably the world’s most successful supermarket loyalty and rewards scheme and provides the grocer with data and insights that no one else has, enabling it to react rapidly to changes in the market or to shopper habits.

Sainsbury’s is trying to do something similar with Nectar, while both schemes are increasingly able to personalise offers to individual customers, entrenching loyalty.

That may become even more important if, as Simon Roberts, Sainsbury’s chief executive, asserts, the ‘big weekly shop’ is becoming more important as working from home becomes less common.

Tesco and Sainsbury’s sharper than they used to be

As the renowned sector watcher Clive Black, analyst at investment bank Shore Capital puts it: “We need to remember that the listed players are better grocers than Asda with a broader customer set, stronger balance sheets and a will to remain competitive”.

He points out that, apart from the advantages bestowed by their loyalty programmes, Tesco and Sainsbury’s are sharper on price than they used to be, are able to price-match Aldi meaningfully and offer better ranges and more choice than both the German pair and Asda.

That view is shared by the retail team at brokerage Jefferies which has questioned whether Asda’s price cuts can deliver the increase in grocery volumes in the time it requires without a fresh injection of capital from shareholders.

What about consumers?

Will this be good news for consumers? Possibly.

But the grocery sector will be hit hard by the forthcoming increase in the national living wage and, more especially, the rise in employer’s national insurance contributions announced by Rachel Reeves, the chancellor, in her autumn budget.

Those measures will not only push up the costs of supermarkets but also those of their suppliers. Those higher costs will at least be partly passed on to customers.

So too will be the cost of implementing new recycling regulations due in October.

And, all the while, food price inflation is picking up in staples such as eggs, milk and butter. The British Retail Consortium is expecting food price inflation to be north of 4% during the second half of this year.

Accordingly, while Asda’s price war may bring some relief, it feels more likely at present as if it will merely result in lower price rises than British shoppers would otherwise have experienced rather than an outright drop in prices across the board.

Business

Concierge firm founded by Queen’s nephew hunts buyer

Published

12 hours ago

May 17, 2025

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Concierge firm founded by Queen's nephew hunts buyer

Quintessentially, the luxury concierge service founded by the Queen’s nephew, is in talks to find a buyer months after it warned of “material uncertainty” over its future.

Sky News has learned that the company, which was set up by Sir Ben Elliot and his business partners in 1999, is working with advisers on a process aimed at finding a new owner or investors.

City sources said this weekend that Quintessentially was already in discussions with prospective buyers and was anticipating receipt of a number of firm offers.

Sir Ben, the former Conservative Party co-chairman under Boris Johnson, owns a significant minority stake in the company.

The Quintessentially group operates a number of businesses, although its core activity remains the provision of lifestyle support to high net worth individuals including celebrities, royalty, and leading businesspeople.

It also counts major companies among its clients and offers services such as organising private jet flights and performances by top musicians.

The sale process is being overseen by a firm called Beyond, although further details, including the price that the business might fetch, were unclear on Saturday.

One insider said parties who had been contacted by Beyond were being offered the option to buy a controlling interest in Quintessentially.

This could be implemented through a combination of the repayment of outstanding loans, an injection of new funding into the business, and the purchase of existing shareholders’ interests, they added.

Quintessentially’s founders, including Sir Ben, are thought to be keen to retain an equity interest in the company after any deal.

In January 2022, newspaper reports suggested that Quintessentially had been put up for sale with a valuation of £140m.

Deloitte, the accountancy firm, was charged with finding a buyer at the time but a transaction failed to materialise.

Sir Ben, who was knighted in Mr Johnson’s resignation honours list, turned to one of Quintessentially’s shareholders for financial support during the pandemic.

World Fuel Services, an energy and aviation services company, is owed £15.5m as well as £3.5m in accrued interest, according to one person close to the process.

The loan is said to include a warrant to convert it into equity upon repayment.

Quintessentially does not disclose the number or identities of many of its clients, although it said in annual accounts filed at Companies House in January that it had increased turnover to £29.6m in the year to 30 April 2024.

The accounts suggested the company was seeing growth in demand from clients internationally.

“During the last year, we have not only renewed important corporate contracts like Mastercard, but have also expanded by adding new corporate clients like Swiss4 in the UK, R360 in India, and Visa in the Middle East and South America,” they said.

In its experiences and events division, it won a contract to work with the Red Sea Film Festival and to provide corporate concierge services to the Saudi Premier League.

It added that Allianz, the German insurer, BMW, and South African lender Standard Bank were among other clients with which it had signed contracts.

The accounts included the warning of a “risk that the pace and level at which business returns could be materially less than forecast, requiring the group and company to obtain external funding which may not be forthcoming and therefore this creates material uncertainty that may cast ultimately cast doubt about the … ability to continue as a going concern”.

This weekend, a Quintessentially spokesman declined to comment on the sale process.

Business

Superstar Adele joins backers of music royalties platform Audoo

Published

1 day ago

May 16, 2025

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Superstar Adele joins backers of music royalties platform Audoo

Adele, the Grammy award-winning artist, has joined the list of music superstars investing in Audoo, a music technology company which helps artists to receive fairer royalty payments.

Sky News has learnt that the British musician and Adam Clayton, the U2 bassist, have injected money into Audoo as part of a £7m funding round.

The pair join Sir Elton John, Sir Paul McCartney and ABBA’s Bjorn Ulvaeus as shareholders in the company.

Changes to Audoo’s share register were filed at Companies House in recent days.

Audoo, which was established by former musician Ryan Edwards, is trying to address the perennial issue of public performance royalties, in order to ensure musicians are rewarded when their work is played in public venues.

Mr Edwards is reported to have been motivated to set up the company after hearing his own music played at football stadia and in bars, without any payment for it.

Estimates suggest that artists lose out on billions of dollars of unaccounted royalties each year.

London-based Audoo uses a monitoring device – which it calls an Audio Meter – to recognise songs played in public venues, and which is said to have a 99% success rate.

It has struck what it describes as industry-first partnerships with organisations including the music licensing company PPL/PRS to track and report songs played in public performance locations such as cafes, hair salons, shops and gyms.

“At Audoo, we’re incredibly proud of the continued support we’re receiving as we work to make music royalties fairer and more transparent for artists and rights-holders around the world through our pioneering technology,” Mr Edwards told Sky News in a statement on Friday.

“We have successfully reached £7m in our latest funding round.

“This funding marks a pivotal moment for Audoo as we focus on our growth in North America and across Europe, bringing us closer to our mission of revolutionising the global royalty landscape.”

Sources said the new capital would be used partly to finance Audoo’s growth in the US.

The latest funding round takes the total amount of money raised by the company since its launch to more than $30m.

Mr Edwards has spoken of his desire to establish a major presence in Europe and the US because of their status as the world’s biggest recorded music markets.

Adele’s management company did not respond to an enquiry from Sky News.

Business

The Sunday Times Rich List: Billionaires fall as King rises to match Rishi Sunak

Published

1 day ago

May 16, 2025

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The Sunday Times Rich List: Billionaires fall as King rises to match Rishi Sunak

The King’s personal fortune has shot up by £30m to put him on par with Rishi Sunak and his wife Akshata Murty, while the overall number of billionaires in the UK has plummeted, according to The Sunday Times Rich List.

The 2025 list, published on Friday, shows the King’s personal wealth grew from £610m to £640m, taking him up 20 places to 258 – level with former prime minister Mr Sunak and his wife.

The number of overall UK billionaires has fallen to 156 from 165 in 2024, marking the biggest drop since the rich list began 37 years ago.

Gopi Hinduja and his family, behind the Indian conglomerate Hinduja Group, topped the list for the fourth year running with £35.3bn.

Meanwhile, founder and chairman of global chemicals company Ineos Sir Jim Ratcliffe, who became part owner of Manchester United last year, dropped from fourth place to seventh after his reported wealth went from £23.5bn to £17.05bn.

Sir Jim’s £6.47bn losses marked the biggest on the list, while Russian-born brothers Igor and Dmitry Bukhman, who built a fortune on mobile games such as Gardenscapes and Fishdom, made the biggest gains with nearly £6.2bn.

New entries included makeup mogul Charlotte Tilbury with £350m and Ellen DeGeneres, who left the US for the Cotswolds last year.

The Sunday Times said the list was one of its toughest to compile due to Donald Trump’s tariffs and the subsequent stock market turbulence, adding many from previous years had dropped off the list and others were no longer eligible having fled Britain after Labour’s non-dom crackdown.

Overall, the combined wealth of those on the list stood at £772.8bn – down 3% from the last list.

Speaking to Anna Jones on Sky News Breakfast, Rich List compiler Rob Watts highlighted the story of Tom and Phil Beahon, who own sportswear clothing brand Castore which is now worth £1bn, as one of his favourites.

The brothers from Wirral have debuted at joint 345 on the list with an estimated wealth of £350m.

Calling their story “inspiring”, Mr Watts said: “They dreamed of being sportsmen as lads – one of them got onto the books of Tranmere Rovers and the other played cricket for Lancashire, but their sporting careers were over in their early 20s.

“And they say that failure was critical to driving them to create this £1bn sports kit business that you’ll now see being worn by the England cricket team and the England rugby team.”