Walmart, the world‘s largest retailer based in the United States, owned a majority stake in British supermarket chain Asda for over 20 years. However, in February 2021, Walmart sold Asda in a £6.8 billion deal. So who owns Asda now, and why did Walmart decide to sell? This in-depth article provides a comprehensive analysis of the history between Walmart and Asda and the implications for UK retail moving forward.
Origins of Asda – From Small Family Business to National UK Retailer
Asda has its early beginnings as a family-run butcher shop founded in 1949 in Yorkshire, England. In 1965, the Asquith family merged with an associated dairy company owned by the Noel Stockdale to form the Asda name – combining the first two letters from the "As"quith and "Da"iry company names.
This formed the basis for what would become one of the largest supermarket chains in the UK over the next 30 years. Through a series of mergers, acquisitions and store openings centered around a low price offering, Asda rapidly expanded to 209 stores by the early 1990s.
However, the pace of growth also saddled Asda with significant debts totally nearly £1 billion by the mid 1990s. The company brought in external advisers from Walmart to conduct an operational review, which led to a turnaround and positioned Asda as an attractive takeover target.
Key Asda Growth Statistics:
- 1965: Asda founded with the merger of two family-owned retail businesses
- 1970s – 1990s: Expanded to over 200 stores via mergers and acquisitons
- Early 1990s: Asda burdened with nearly £1 billion in unsustainable debts
- Late 1990s: Implemented Walmart advice to streamline operations and cut costs
Walmart Seizes Opportunity to Enter UK Grocery Market
In July 1999, Walmart purchased Asda for £6.7 billion after an intense bidding war with rival UK retail group Kingfisher. Walmart had been seeking an opportunity to crack the UK retail market as part of its broader international expansion strategy beyond the United States.
Acquiring Asda gave Walmart an established player with strong national brand awareness and a growing store footprint of over 250 locations. Asda also offered Walmart quick access to the enormous £120 billion UK grocery market with its convenient one-stop shopping formats.
Under Walmart‘s full ownership, Asda rapidly adopted American-style supply chain efficiencies, pursued economies of scale, and reinforced its rock-bottom cost positioning to drive high volumes. This supported adding even more large-format stores over the 2000s to enhance one-stop shopping convenience for the weekly shop.
By the mid-2000s, Asda cemented itself as one of the "Big Four" grocery retailers in the UK alongside market leader Tesco, Sainsbury‘s, and Morrisons – occupying a leading value price positioning behind German discounters Aldi and Lidl.
Walmart‘s Strategic Rationale for Acquiring Asda:
- Gain foothold in £120 billion UK grocery market
- Leverage Asda‘s national brand awareness & 250+ store footprint
- Implement supply chain and operating best practices
- Expand Asda‘s one-stop shopping formats & product ranges
- Replicate Walmart‘s rock-bottom EDLP cost model to drive volumes
Asda Store Count Growth Under Walmart Ownership
| Year | Total Asda Stores |
|}
| 1999 | 258 |
| 2005 | 288 |
| 2010 | 519 |
| 2015 | 609 |
| 2019 | 631 |
Steady Asda Growth Under Walmart Era
In the first half of Walmart‘s ownership from 1999-2009, Asda experienced steady consolidated growth in locations, product ranges, market share and profitability.
Asda adopted Walmart‘s famous low price EDLP (Every Day Low Prices) positioning in 2006 to further reinforce its value credentials. This supported consistent market share gains over rivals who struggled to match Asda on price and scale.
Behind the scenes, Walmart implemented state-of-the-art forecasting systems and supply chain infrastructure to tightly manage inventory costs. This generated major savings that Asda passed through on everyday low prices to drive higher volumes.
During this period, Asda also expanded its clothing range, added more premium own-brand items, enhanced fresh food and produce, and widened international food selections. These actions helped broaden Asda‘s customer demographic beyond just value-conscious shoppers.
In the late 2000s, Walmart transferred official ownership of Asda to its wholly-owned subsidiary Walmart International to simplify corporate structure. But Walmart in practice retained full control over Asda‘s strategy and operations throughout the next decade.
Asda Revenue Growth 1999-2009 (£ billions)
| Year | Asda Revenue | Annual Growth Rate |
|---|---|---|
| 1999 | 8.6 | |
| 2000 | 9.2 | 7% |
| 2005 | 14.6 | 9% |
| 2009 | 19.4 | 5% |
Asda Key Achievements 1999-2009
- Grew UK grocery market share from 11% to 16%
- Boosted store count from 258 to 371 locations
- Added 40,000+ product lines across ranges
- Launched stand-alone George fashion stores
- Expanded online grocery pilot program
Challenging Times for Asda in 2010s Under Walmart
The 2010s proved to be a more challenging period for Asda in an increasingly competitive UK supermarket industry. Shift to hard discounters Aldi and Lidl intensified margin pressure across the sector.
Asda struggled to grow both in-store and online against Tesco, Sainsbury‘s and Morrisons who all heavily invested in e-commerce and technology capabilities. By 2015, Asda‘s market share slipped back to 15% – giving up ground against major rivals.
Behind the scenes, Asda grappled with several changes in top-level leadership in the mid 2010s. First CEO Andy Clarke exited in 2016 after sales growth stalled. Incoming CEO Sean Clarke exited just 18 months later after announced job losses tarnished morale.
In 2018, Walmart moved Judith McKenna from head of Walmart International to lead a turnaround effort at Asda. McKenna made moves to restructure operations, cut costs, reduce complexity, and make more corporate decisions from Asda headquarters rather than Walmart.
But the decline continued. By 2020, Asda‘s sales growth lagged far behind competitors. Online order fulfillment and delivery capabilities were also behind rivals who better anticipated rapid growth in online grocery demand. It became clear Walmart needed a drastic change.
Asda Struggles 2010-2020
- Stagnant in-store performance from margin pressure
- UK grocery market share declined to 15%
- Underinvested in e-commerce capabilities & technology
- Top-level leadership instability from 2016-2018
Asda vs Top Supermarket Chains: 10 Year Sales Growth
| Retailer | Total Sales Growth 2010-2020 |
|---|---|
| Tesco | 25% |
| Sainsbury‘s | 20% |
| Morrisons | 19% |
| Asda | 10% |
Why Walmart Chose to Sell Asda in 2021
In October 2020, Walmart announced plans to sell Asda in a landmark £6.8 billion deal. After over 20 years as owner and operator, Walmart decided the time was right to exit the investment despite previously regarding Asda as the crown jewel of their international portfolio.
Industry experts cite several driving factors behind Walmart‘s decision:
1. Tough UK Retail Climate: Intensifying margin pressure plus growing e-commerce/technology costs made it difficult for Walmart‘s US-based team to operate Asda competitively from afar.
2. Failed Previous Exits: Walmart struggled across European markets like Germany where the US discount retail models didn‘t directly translate. Selling Asda enabled a clean break to redirect attention.
3. Refocus Investment: Walmart wanted to shift more resources into higher growth markets like China and India where billion-plus populations offer greater long-term upside.
4. Leadership Instability: After several failed CEO choices and strategy pivots, Walmart lacked confidence in sustainable turnaround under their operating model.
Selling to a well-capitalized British entity provided a pathway for Asda to stabilize and renew growth by making localized decisions catered specifically to UK customers and market dynamics.
Asda Changes Ownership for First Time in Over 20 Years
The £6.8 billion Asda deal finalized in February 2021 to new British owners, Mohsin and Zuber Issa. The Issa brothers founded and grew convenience store operator EG Group into a $15 billion empire with over 6,000 locations across Europe and North America.
Their expertise in gas stations and smaller format stores differed greatly from Walmart and Asda‘s hypermarket backgrounds. But the Issas saw potential to improve Asda convenience and reignite growth through a combination of investments centered around three key pillars:
-
Price Positioning: Reinforce Asda‘s price competitiveness versus Aldi, Lidl and other UK chains.
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Localization: Enable UK-based leadership to make tailored decisions understanding British customer needs.
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Ecommerce Acceleration: Rapidly advance Asda‘s online capabilities after falling behind rivals in recent years.
The deal also included an ongoing commercial partnership with Walmart, including a continued equity investment and seat on Asda‘s Board. This allows Walmart to retain exposure in UK retail, while unlocking greater flexibility for the Issas implement initiatives needed to modernize Asda.
What Are the Implications and Outlook for UK Retail?
Asda‘s new British billionaire owners inherit a well-recognized national brand, but face an immense challenge to stabilize declining market share trends and turn performance around in a difficult sector.
With over 600 stores, the Asda imprint seems destined to remain a fixture providing value positioning to UK shoppers. However, the grocery landscape could look vastly different in 5-10 years. Continued consolidation whether led organically or through mergers & acquisitions seems highly likely.
In the near-term, the Issas made smart first steps by bringing in seasoned UK retail executive Stuart Rose as Asda Chairman to complement CEO Roger Burnley‘s 30+ years of Asda experience. Investing in talent will be critical to craft and execute a smart commercial strategy.
Building on the solid foundation and scale advantages established under Walmart, the future looks bright for Asda to rebound under more localized ownership tuned into UK customers. And UK shoppers stand to benefit from a renewed competitive spark to keep prices low across the grocery sector.
