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

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

  • Third and fourth-biggest grocers losing ground to rivals Tesco and Sainsbury’s 
  • They are also 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 as 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. 

They are also haemorrhaging shoppers to Aldi and Lidl as hard-pressed families look for ways to cut the cost of the weekly shop. 

And in a development that will rattle the new owners of Morrisons, the Bradford-based grocer is set to lose its spot in the ‘Big Four’ 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 year. 

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

By contrast, revenues at Tesco fell by just 1.1 per cent while Sainsbury’s sales were down 3.9 per cent. Heading in the other 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 year 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 in the Big Four behind Tesco, Sainsbury’s and Asda. 

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

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

The differing fortunes of leading grocers will fuel fears private equity barons are not good stewards as the cost 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 absorb increasing costs. 

Hargreaves Lansdown analyst Susannah Streeter said: ‘The discount grocers are snatching more customers from Morrisons and Asda, which seem to be falling behind in the competition to cut 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’s going to be a lot harder to find room for fresh rounds of price cuts.’ 

Black said the new ownership of Morrisons and Asda is part of the decline in their sales and market share. He said: ‘They are profit maximisers and are clinical cash flow people. Whether 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. Companies House filings show Asda has paid £375.1m in interest on debt used to fund the deal. 

Hyman suggested Asda’s woes are not caused 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 less than a year in 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 in the past year, while inflation runs at 9.1 per cent. The figures showed Morrisons’ prices rose 12.3 per cent over the year. Morrisons declined to comment.