Bringing the A game

Asda fresh produce category manager Charlie Mills is discussing the retailer’s recent poor performance with a frankness that is rarely heard among retailers.

“Asda’s performance hasn’t been great,” he concedes. “Market share and sales haven’t been brilliant for about two years. If we’re reflecting on it, we probably missed the boat on combating Aldi. We knew they were coming, and we didn’t do a good enough job on our strategy to come up against them – Tesco has done quite a good job, and you can see their recovery from that.”

Recent sales decline, (down 7.5 per cent in Q2), is nothing new in an industry that has been charting similarly dismal results for the past few years. But Mills’ cheerful honesty reminds me of a company that has hit rock bottom and knows the only way is up. And that is exactly the atmosphere he describes at Asda House, the site of our interview, and where the retailer’s Project Renewal is in full flow under the leadership of new CEOSean Clarke.

Nowadays, it seems as though all the major retailers have one of these roadmaps, filled with power words and promises, and yet there is little sign of any change on the till rolls. But it’s hard not to be impressed with the sheer scope of Asda’s plan, which consists of nothing less than a pricing overhaul, range rebuild and investment into stores and colleague hours.

Rumours that Asda was gearing up for a fresh offensive in the retail price wars began to circulate this summer, and Mills confirms that in the last month Asda has slashed the prices of 45 produce items, leading to an instant sales uplift.

The investment was partly down to Clarke, according to Mills, who he says encouraged price cuts across multiple lines. “Where we would normally invest in five lines and do something quite weak, he said no, do it across lots of lines. We have spent a hell of a lot of money investing in a broad range of products. So 45 products have gone down, which we know versus competition are good deals. We’ve also picked a few areas strategically where we know we’re going to go up against Aldi or we’re going to try and beat them on price, because we know it’s important to customers.

“One of these is potatoes, so rather than getting into a price war on one line, we’re giving customers a better deal across varieties,” he says. The retailer will also directly compete with Aldi on berries and front-of-house promotions, where it now offers five lines “as soon as you walk in” that are 50p, in competition with Aldi’s Super 6.

“The past few weeks we’ve had pineapple on at 50p, which has gone up 600 per cent in sales – we can’t get enough, it’s incredible,” continues Mills, who has overseen Asda’s produce category management for the past two years. “It’s a bit of Asda personality – we’ve had stores creating massive pineapples out of card, and that kind of excitement and buzz really works for us.”

Traditionally known as the cheapest multiple retailer, Mills insists that price will remain Asda’s raison d’etre. He says: “We’re still cheaper – we’re 10 per cent cheaper than the other top three retailers. But people see Asda as more expensive than Aldi. We know that their quality isn’t as good as ours, because it can’t be because of the model we’ve got through IPL. And that model only gets better with volume, because then it becomes more efficient, and then we can invest back into quality. Price yes, but also value, because you can’t be cheap but selling rubbish.”

Another wave in the supermarket price war may be far from welcome news for suppliers, but Mills is clear of its importance. “Instinctively as Asda, putting price up is always wrong,” he says. “Every price that goes up in produce I have to approve, and I have to ask is this the right thing to do? Instinctively you think no. The target is by the end of 2018 is to be within five per cent of Aldi’s prices, but with Sainsbury’s quality. Which obviously, is a bit of an impossible feat, but one by one we’re doing it, and I’m confident we’ll get there.”

Like-for-like sales have already benefited from the recent price activity – Mills says fresh produce sales were down by six per cent, but they are now almost flat.

“It’s just by making the prices right, and working on range, and putting some stock on the shelf, basic stuff,” he explains. “The plan is by Christmas to be at least flat, for value and volume. The main focus now is volume, because that gets the whole machine going. Asda is a big organisation, and so is IPL, so the more volume you have going through, the more efficient it becomes.”

Following the price work, Mills is now focused on a major range revamp. “I don’t think our range is right, and I don’t think our tiering is right. We’re about to head into what we call a cat-strat process, so a category strategy process, which will build bottom-up what our range should be. So for example, we might start with one lemon, and say what else do we need. Rather than start with our current range and say what do we not need.

“Things like mushrooms are a complicated range in Asda, it has around 20 products and they’re all different pack sizes and price points. How do you figure out what is the best value?”

Although he believes the number of SKUs needs to go down, stating “that’s the general view in the business” and looking again to Aldi which has a third of the SKUs of Asda, Mills is quick to reassure that he is not in the business of delisting. “I wouldn’t be worried about the range review from a supplier point of view. The whole point of that is everyone wants to sell more stuff, throughout the whole chain,” he says.

“I’m keen that there isn’t a perception that Charlie from Asda says we’re going to delist all these lines, and screw over loads of suppliers – that isn’t what we’re trying to do. We want to sell customers the right stuff and sell more volumes. We can’t carry on declining, because that will mean at some point our suppliers will have to be delisted, which no one wants.

“We’ve gone through the range, we’ve recommended lines to delete, and then we’ve had the conversation with the grower. And we’ve said that if you’re going to be growing that for the next year, we’ll still take it from you, because that’s the right thing to do.”

Asda is “not looking to consolidate its supply base”, he continues, although it will also not keep things for the wrong reasons. “Our range is too prolific. It’s more a simplification of range for me, but equally finding the exciting stuff like purple sprouting broccoli, or Beneforte, and listing that kind of stuff – so it’s about getting the balance right.”

Under the new strategy, British produce may get more of a look in than perhaps it has in the past at Asda, which undertrades in key homegrown produce lines such as apples. Mills says: “Over the years, we’ve explored different supply routes, and we’ve probably gone out of the UK because it’s been beneficial for us cost-wise. Whereas now the attitude is, if we can get it British for the right price then we do that first, and we’ve started backing it with more media.”

The retailer has had success with its British-grown grapes, sweet potatoes and a new British melon, says Mills, while its wonky veg boxes – sold for £3.50 for 5kg – sell out “within hours”.

Another task on Mills’ rather packed agenda is putting more trained staff into the produce aisles, something that hasn’t been easy in a business that is focused on stripping out costs wherever possible. “Colleague training is the next stage for me – you’ve got good quality stuff, it’s cheap, and the store’s looking good, the next phase is make sure you’ve got experts in produce.

“Tesco tried it but I believe they’re withdrawing it. It’s a lot of cost in a business where ultimately we need to invest in price, to layer another layer of cost is quite difficult.”

It’s a hugely ambitious and comprehensive overhaul, designed to drag Asda into the modern day and once again compete with the industry’s frontrunners. It is perhaps also a sign that the retailer has realised that firefighting, or filling holes on price and range, are no longer enough to compete with the permanence of Aldi, Lidl, and not to mention new entrants such as Amazon Fresh.

As Mills says: “The past couple of years, when sales have gone down morale has gone down, whereas now it’s buzzy and it’s exciting.” There is certainly a buzz in the Asda air, and many will be watching to see if it sparks a genuine and long-lasting change.

Integrating Fenmarc and QV into IPL

Asda made its decision to grow the IPL sourcing model clear with the purchase of both Fenmarc and the QV potato businesses, a decision Mills says was primarily down to cost efficiencies. On integrating the two businesses, Mills says on the whole it has been “pretty simple”, though he adds: “On the flip side, in the old days there was a supplier and a retailer mindset. And removing that perception from people who have been in the business for 25 years is quite difficult. Especially for me, as I’ve only been in retail for five years so I’m quite innovative in approach, whereas you can get some ‘blockers’, but overall it’s working.”

Who is Charlie Mills?

• Mills first joined Asda seven years ago on a university placement, as a training assistant on poultry.

• He studied retail marketing before joining a red meat supplier, from where he was seconded into Asda.

• He then worked as a category planner on fish and then poultry at the retailer, before joining the produce category two years ago.

• “My ambition is to stay in Asda and stay in fresh food,” he says. “My view is to progress myself within produce, because there’s so much to get after, and for the next two to three years we’re going to be on that growth curve.”