Mohsin and Zuber Issa and TDR Capital’s acquisition of Asda from U.S. giant Walmart—a transaction expected to complete in the first half of 2021, subject to regulatory approvals—will inject new energy into the U.K. convenience retail scene. The deal is independent of EG Group, and the Issa brothers are making the acquisition in a personal capacity.
Just weeks before the deal was announced, the U.K.’s third largest supermarket group announced plans to expand into convenience stores with a trial of a new Asda on the Move concept at three EG Group forecourt locations in the Midlands, U.K.
EG Group is an international forecourt, food to go and convenience store operator with about 6,200 stores across Europe, the U.S. and Asia Pacific. Asda, meanwhile, has circa 580 stores and about 320 forecourts.
Announcing the deal, Walmart stated that besides accelerating Asda’s existing Everyday Low Pricing (EDLP) strategy, the Issa brothers will bring significant expertise, drawing on their experience as a global convenience retailer. “They are well placed to support Asda in developing a compelling convenience retail proposition and taking it to market, and to advise on the development of strategic brand partnerships that will better enable Asda to address multiple consumer missions,” the retailer said, with the goal of “building a differentiated operating model that will drive competitive outperformance and long-term growth.”
The Issa brothers said: “We believe that our experience with EG Group, including our expertise around convenience and brand partnerships and our successful partnership with TDR Capital, can help to accelerate and execute that growth strategy. After a successful period as part of Walmart, we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the U.K.”
The deal comes two years after Asda tried to merge with Sainsbury’s, a proposal that was blocked by the U.K.’s Competition and Markets Authority in April 2019. Since then, Walmart had indicated it was exploring an alternative future for Asda that did not involve its full ownership.
In February 2020, the business confirmed it was considering opportunities for a third party to invest in Asda. By March, reports suggested that three buyout specialists—Apollo Global Management, Lone Star Funds and TDR Capital—had been invited to join the next round of bidding. However, in April the business put the sale on hold to focus fully on its response to the COVID-19 pandemic. Talks were restarted in July 2020.
For Nick Gladding, senior retail analyst at the IGD, it was clear why TDR Capital was the front-runner and preferred bidder, even if press reports suggested otherwise. TDR Capital owns 50% of EG Group. “Founded in 2001 as Euro Garages with the acquisition of a single forecourt by the Issa brothers, EG Group has grown swiftly to become one of the world’s largest forecourt operators with over 6,000 sites across 10 countries and revenues of €20 billion,” he said. “Key to its rapid expansion has been a focus on developing high quality modern in-store environments and a retail proposition that are both attractive to motorists and often also function as local convenience stores. To do this, EG Group works with a range of retail and foodservice brands, including Starbucks, Greggs, Subway and KFC in the U.K.”
We are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the U.K.
EG Group recently announced the trial of a new on-the-go pizza concept, operating under NKD Pizza’s sister brand, “Slices by NKD.” A trial launch with global pizza brand Sbarro has also just started, with a plan to extend the trial across five of EG Group’s sites.
Asda On the Move
The Asda On the Move trial at EG Group fuel station forecourts in Ashby, Leamore and Primley is designed to provide customers with greater access to the supermarket’s products and prices. The new convenience proposition follows the successful launch of Asda’s partnership with Uber Eats in July, which has now been expanded to 25 stores.
Preyash Thakrar, Asda’s chief strategy officer, said: “Our partnerships strategy is focused on making our busy customers’ lives easier. That means offering convenience when they visit our stores by bringing in complementary brands to help them complete more shopping missions in one location, and convenience that makes our great value products more accessible in local communities.”
Gladding at the IGD said the partnership with EG Group made a lot sense. “Asda is one of the U.K.’s largest fuel retailers but has not used its retail expertise to build up a network of stand-alone forecourt convenience stores. It currently operates just 18 stand-alone sites, a total that has fallen over the last year, at a time when rival Morrisons has built up its reach by partnering with several forecourt operators,” he said.
EG Group’s acquisition of Asda could have implications for Spar, the forecourt retailer’s current convenience store provider. Question marks will also hang over EG Group’s more recent collaboration with the Sainsbury’s On the Go format, launched in February 2020 and rolled out to 22 EG Group sites in July.
On the Go is EG Group’s second stint with the top four supermarket, shifting away from a royalty-based model similar to foodservice brands, to one where Sainsbury’s serves as a branded wholesale distributor. EG Group launched a forecourt franchise trial with the supermarket in 2016 but terminated it two years later. Speaking prior to the Asda announcement, Ilyas Munshi, group commercial director at EG Group, said the On the Go move was part of a strategy to transform c-store forecourt space from being a distress purchase environment to one where shoppers are able to purchase fresh food and food to go.
Our partnerships strategy is focused on making our busy customers’ lives easier.
“We have established a fantastic business with Spar, who have been our partner from early on and have helped us grow significantly,” Munshi said. “We are pleased to have relaunched a franchise trial with Sainsbury’s On the Go, providing our customers with more options for their shopping.”
Asda On the Move in Ashby opened on October 19 and was the third of the three new concept stores to open at EG Group sites in the Midlands. It’s a multi-branded location that features Esso fuel, KFC, Starbucks On the Go and Starbucks Drive-Thru, Greggs and Greggs Drive-Thru, plus Asda On the Move, replacing a former Spar store. A 24-hour location, the store has a bright and industrial-style, modern interior and an immensely shoppable offer.
The layout is clean and uniform with low shelving providing brilliant sight lines across the store. Signage is strong, with displays dedicated to key shopper missions and categories including: Fresh Meat & Produce, Food to Go, Food for Later, Chilled Drinks, Frozen Foods and the like. A variety of categories such as protein, rice and pasta, pet food, fresh flowers, canned vegetables, cereals and more are also clearly marked, and promotional products are located on the end of aisles, flagged up by the famous “That’s Asda Price” messaging.
Greggs is tucked neatly inside the right-hand-side of the store entrance and caters to takeaway and eat-in customers, while a Starbucks counter provides a self-serve, takeaway coffee offer.
Spacious aisles and meticulous merchandising make Asda On the Move incredibly navigable, with ample space to maintain social distancing. The brand caters to multiple shopper missions—for those just wishing to enter quickly, pay for fuel and leave, to customers purchasing food-for-now and more extended top-up shopping needs.
It’s a concept that could easily roll out to other EG Group locations. At the same time, EG Group’s foodservice brand partnerships could extend to Asda supermarkets with in-store “concessions” akin to those the retailer has already introduced with the likes of Greggs, toy retailer The Entertainer, DIY specialist B&Q, music Magpie and Fragrance Point.
That would enable Asda to achieve its ambition of meeting multiple shopper missions and make EG Group’s forecourts an even more attractive, convenient destination for customers.