Mohsin Issa arrived at Asda’s Leeds headquarters three years ago full of purpose. Internally, the supermarket chain’s new co-owner likened Asda to a supertanker and said it would be more of a jet ski under the leadership of him and his brother Zuber – two of Britain’s most prominent businessmen.
To highlight this, Mohsin challenged Asda executives to achieve a 10 per cent increase in sales over Christmas. Asda’s senior team, seasoned veterans of supermarket retailing, a tough business where every sale is scrapped, were taken aback by the scale of Mohsin’s ambitions, convinced that the targets could not be met. Asda’s Christmas sales fell by 2.9 per cent.
Over the past few years, Mohsin’s vaulting ambitions have clashed a brutally competitive market characterized by soaring interest rates, inflation and limited consumer spending.
“It’s a bit like Mike Tyson saying, ‘Everyone has a plan until they get punched’,” said Asda chairman Lord (Stuart) Rose, who joined the business at the end of 2021. “We had an aspiration [to grow] three years ago, but there were many things beyond our control. We’ve achieved a hell of a lot – but we’d like to move a lot faster.”
Now, three years after taking over Asda, the brothers are set to hand the reins to someone else. Zuber, 51, completed a deal this month to sell his 22.5 percent stake in Asda to TDR Capital, the London-based private equity firm that underpinned the brothers’ rise.
Meanwhile, Mohsin, 52, has agreed to return to running EG Group, the brothers’ global petrol empire, once Asda finds a suitable chief executive to replace him.
Asda, which employs 160,000 people, is a bigger business than the one Issas and TDR acquired from Walmart. It is also far more in debt. After three eventful years—marked by daring deals, fraternal troubles, and a fight with unions—the Issa’s leave behind a complicated legacy. Has Asda been enhanced or diminished by the brothers and their private equity backers?
Asda workers protested outside a branch in Bournemouth
GMB UNION/ANDREW WIARD
When Walmart put Asda up for sale, it received three bids from private equity firms, but TDR’s proposal stood out because it teamed up with Issas. The billionaire brothers, who grew up in a two-storey, two-floor house in Blackburn, went from running a single petrol yard in Bury to building EG Group, a £20bn global empire, in two decades.
They came with great energy. Mohsin began negotiating with suppliers himself to exemplify the “roll up his sleeves” attitude he expected from others. “If you’ve been sitting in a relatively comfortable position at Asda then it’s fair to say it was a bit of a culture shock. Mohsin picked up the tree and shook it and a lot of stuff fell out,” Rose said.
In 2021, in the dying days of the low interest rate era, the brothers bought fast food chain Leon and unsuccessfully tried to get their hands on Caffè Nero, Boots, Topshop and toy chain The Entertainer. The ambition was to remake Asda supermarkets as mini shopping centers lined with the brands they owned.
While a sharp rise in interest rates has forced the brothers to rein in store closures, Asda executives are now pushing ahead with plans to open Greggs, Subway and Burger King outlets in larger supermarkets. Drive-thrus in parking lots are also being explored. Asda cultivates these brands thanks to the long-standing relationship they have with sister company EG.
Perhaps the defining moment of Issas’ reign was last year’s £2.3bn deal which merged Asda with the UK arm of EG Group.
The deal gave Asda a foothold in the convenience market. As part of Issas, Asda went from having no convenience stores to operating 479 Asda Express sites – mainly acquired from EG and the Co-op. The supermarket’s owners have earmarked 100 separate sites for new convenience stores, with ambitions to open 300 in total.
The acquisition of EG also broadened Asda’s asset base and boosted its cash flows, easing the way for a mammoth £3.2bn debt refinancing injected into the business by Issas and TDR.
Asda’s total debt is £4.8bn – four and a half times underlying earnings – against sales of £22bn. The supermarket has additional liabilities of £1.5bn, including lease obligations arising from the sale and leaseback of its properties. While there was healthy investor demand for Asda’s debt during the last refinancing, the supermarket chain is now on the hook for annual interest payments of £510m.
There are signs that financial pressures are being felt in the workshop. Asda supermarkets are now employing fewer staff – although wages have been raised above the market average to compensate. Store managers have suffered sharp cuts in staff budgets, driven by operational adjustments such as the introduction of more self-service checkouts and the increased use of so-called rack packaging, which allows staff to load full trays of product directly from pallets onto shelves.
“There are not enough colleagues to fill the roles because when people leave, they are not replaced,” said one veteran worker. “Morality is as bad as I have ever known it.
The changes have thrown Asda into a running battle with the GMB trade union, which has organized four walkouts at Asda supermarkets this year.
Shoppers also voted with their feet. In March 2022, Mohsin revealed his main objective: to reclaim Asda’s place as the UK’s second largest supermarket from Sainsbury’s. However, the gap has widened considerably since then, with Asda’s market share falling from 14.5 per cent to 13.1 per cent.
This year, Asda’s product availability was the worst of the five big supermarkets tracked by trade magazine The Grocer. It has been without a commercial director since the departure of Ken Towle, who left in February last year just ten months after joining. He is belatedly replaced by Matt Heslop, recently recruited from Lidl.
EG Group founders Mohsin, right, and Zuber Issa in 2019
JON SUPER/ALAMY
“Regaining market share is absolutely essential,” said Rose. “I’d like to see how our day-to-day work in the stores really flies.” One Asda executive said the business had been raising prices more slowly than the market this year, which he hoped would translate into better results in the coming months.
Mohsin was closely involved in Project Future, the mammoth £800m effort to untangle Asda’s systems from Walmart. Ahead of the takeover, Asda bosses prepared a plan to disconnect the systems that manage everything from paying staff to ordering stock and running tills. The new owners were presented with a three-year schedule.
“Mohsin made it very clear that it had to be done faster and cheaper,” one insider recalled. “He heard nothing to the contrary. He didn’t take the time to understand why the time frame was the way it was.’
Mohsin pushed the team to complete the transition in two years, a proposal that caused internal unrest and reportedly contributed to the departure of some members of Asda’s technology team who were nervous about the implications of rushing it. “Some people like a fast-paced, dynamic work environment and some people don’t,” said a source close to Asda. “It’s always been a three-year plan, but we’re unapologetic about wanting to bring more urgency.”
However, those nerves seem to be well-founded. A troubled switch to a new pay system in March saw nearly 10,000 workers receive incorrect pay stubs, prompting Asda to scramble to catch up and recover overpayments. This month, Asda is switching to new systems at its tills and commercial functions and aims to be completely separated from Walmart by the end of the year.
The Asda buyout raised the brothers’ public profile to a level neither of them was comfortable with. Mohsin was hauled over the coals in a harrowing select committee hearing to investigate whether Asda profited from petrol during the cost of living crisis – which the company denies.
Zuber, who needed to be persuaded to close the deal in the first place, arranged for the purchase of 34 EG frontcourts in the UK that had been left out of its deal with Asda. He seems ready to settle down to a quieter life and have more time for philanthropic endeavors. The separation of the brothers’ business interests follows the deterioration of their friendship after Mohsin separated from his wife and entered into a relationship with respected accountant Victoria Price.
Asda this month reaffirmed its commitment to hire a permanent chief executive. Mohsin will return to full-time management of the global EG Group, where he will oversee more than 5,500 leading offices in continental Europe, the Americas and Australia, where the board believes he can add further value.
Whoever takes the job will have to help Asda rediscover its identity. Aldi and Lidl have undermined its long-standing position as Britain’s cheapest supermarket, and since taking over Issas, Tesco is now regularly cheaper than Asda on a typical grocery basket, according to industry surveys.
Controversially, Issas also raised petrol prices. A recent RAC survey found that Asda, which has aggressively undercut the market on fuel prices in the past, is now the most expensive supermarket to buy petrol from, once you include forecourt prices next to its new convenience stores. Asda said it remains the leader in fuel prices at its supermarkets.
If the brand that brought us the slogan ‘Asda Price’ doesn’t mean the lowest prices, what does?
“We want to give customers the best value option possible. For me, it’s a function of price and quality,” Rose said. “We did a hell of a lot of work looking at: what is Asda? where does it go And how do we place it? I’m not sure we’ve fully understood it in the eyes of the customer yet.”
This work falls into a new pair of hands. As a director and shareholder, Mohsin will be keenly interested, but his personal ambition to become the entrepreneurial leader who propelled Asda to greatness appears unfulfilled.