Asda to take no part in Iceland bidding

Asda’s chief executive Andy Clarke said a lot of the Iceland shops are under 5,000 sq ft, which would be too small for Asda to convert to its smaller-format stores.

“One retailer is formally in play,” said Mr Clarke, referring to Bradford-based rival Morrisons which appointed Credit Suisse last week as it weighs up making a bid for frozen food chain Iceland.

“We’re not in that position,” added Mr Clarke. “The estate doesn’t fit our model. We will focus on individual stores or parcels of stores. If it comes into the market in that way, we’d look.”

Morrisons could be up against interest from private equity, as well as Iceland founder Malcolm Walker. Analysts believe Iceland could be worth £1.5bn.

Asda has refused to go down the convenience store route, which are typically 3,000 sq ft in size, preferring to offer shoppers the chance to do a full weekly shop with access to up to 10,000 grocery products.

Mr Clarke was speaking yesterday as the group showed journalists around a converted 8,500 sq ft former Netto store in South Harrow in West London.

Asda bought 147 stores from Netto for £780m last year. Following the success of the 61 converted stores, Asda has decided to increase its target to 250 smaller-format stores.

Karen Hubbard, Asda’s operations director for the supermarkets division which covers the smaller-format stores of between 5,000 and 25,000 sq ft, said Asda has been on a steep learning curve following its introduction of smaller-format stores.

“We originally tried to shrink the offer. We took a superstore offer and cut each element down by a third, but it was not satisfying customer needs,” she said.

“Our customers wanted us to be great at food. Some early shops didn’t sell cornflour – we were missing a key element – yet you could buy a keyboard. Here all they want is food,” she said, referring to the group’s South Harrow store.

Asda has introduced a range of George essentials such as pants and socks for children as well as DVDs and a range of children’s products, but the store is predominantly food.

“We’re bringing back the old-fashioned supermarket,” said Ms Hubbard. “It’s convenient but it’s not convenience. We have one price whereas competitors charge different prices.”

Asda has doubled the number of store staff in the former Netto stores.

It has also divided its stores into six formats such as ethnic, early retirement and empty nesters and parts of the store will reflect this with suitable promotions. The South Harrow store has an aisle devoted to Ramadan whereas other stores will focus on Back to School.

Asda’s finance director Rob McWilliam said Asda has seen a sales uplift in excess of 50 per cent following the Netto stores’ conversion to Asda.

The car still the star

ASDA said that around 50 per cent of customers at its smaller-format stores drive to the store.

Around 25 per cent of customers walk, 15 per cent catch a bus and the rest share a lift or come by bike.

Around 85 per cent of customers come from within a ten-minute catchment area of the store.

The shopper profile is similar to Asda’s traditional superstores which range from 25,000 sq ft to 80,000 sq ft.

The stores which are over 80,000 sq ft are known as Asda Supercentres.