Asda’s profit margins on fuel have tripled since before the pandemic, the competition watchdog said at a moody parliamentary hearing in which the supermarket chain’s co-owner repeatedly refused to explain its pricing strategy.
Mohsin Issa refused to answer multiple questions about whether Asda had increased its profit margins on fuel since its takeover in 2021, sending parliamentarians on the business select committee increasingly furious that the retailer insisted it had not changed its strategy.
The Competition and Markets Authority (CMA) released a report this month saying drivers were paying more for petrol and diesel than before the Covid pandemic due to “weakened” competition.
The CMA told the committee there had been a “significant shift” in the supermarket’s pricing approach after billionaire brothers Issa and their private equity partner bought control for £6.8bn in 2021. Asda is now ready to buy the British branch of the Issas. EG Group’s £2.27bn petrol service station business, strengthening its grip at the pump.
Gasoline has become a lightning rod for concerns about the rising cost of living, as skyrocketing inflation in food, energy and other everyday essentials has squeezed household budgets.
Supermarkets are under the spotlight and the CMA is also ready to report whether they have been raking in extra profit on groceries, known as “greed.”
Jonathan Gullis, an MP for the committee, said on Wednesday that “people were being ripped off at the pump” at a time when the cost of living “was already forcing supermarket checkouts to squeeze.” He said it was only when the competition watchdog effectively “named and shamed” what was happening that “supermarkets suddenly magically managed to find a way to reduce their costs by 6p a litre”.
Darren Jones, the committee chairman, said a whistleblower had told him that under Asda’s former owner, Walmart, the retailer had aimed to be at least 1p per liter cheaper than its nearest rival, but the new owners had reduced that target to just 0.1p.
Words faltering, the calm-voiced Issa declined to confirm if that was the case, saying there were many elements that contributed to fuel price decisions.
He insisted the group had not changed its strategy, saying Asda was “proud to be a price leader” and while declining to say directly whether new management had increased fuel profit margins, he suggested the group had, saying that “we invest that margin in food”.
“We don’t see this as a fuel business per se. We see this as a holistic business,” she said. The retailer’s overall profit margins had fallen from 2.7% to 1.7% under his ownership, Issa said.
He insisted he was “absolutely in touch with where customers come from”, having grown up in a “two up, two down” business and said Asda had invested in keeping food prices low and in its loyalty scheme.
Before Issa testified, Dan Turnbull, director of the CMA, told the committee that the chain had maintained its strategy of being a price leader, but had changed course in two other ways: increasing profit margins and “deliberately cutting” prices, or taking more time to react to drops in the wholesale price of fuel. He said this was particularly the case for diesel, where there was a lot of price volatility.
“We found that between 2021 and 2023 they significantly increased their internal fuel margin targets in cents per liter, and in fact, by 2023 those cents per liter targets were three times what they had been in 2019,” he said.
The competition watchdog has said it expects the government to introduce new legislation to ensure fuel retailers provide up-to-date price data to a planned comparison service.
On Monday, Energy Secretary Grant Shapps appeared to back down from plans for a law to force supermarkets to make fuel prices more transparent, instead backing a voluntary pricing scheme.