UPDATE 2-Asda relaunches own brand in bid to catch rivals

Tue Sep 21, 2010 7:21am EDT

* Investing 100 mln pounds in relaunch focused on quality

* New "Chosen by You" range will have 3,500 products

* Asda's own brands account for 8-9 billion pounds of sales

* Regulatory decision on Netto deal expected this week

(Adds CEO quotes, more detail, background)

By Mark Potter

LONDON, Sept 21 (Reuters) - Asda, the British arm of U.S. retailer Wal-Mart (WMT.N), is spending 100 million pounds ($155 million) relaunching its core own-brand range in a drive to improve quality and catch up with faster-growing rivals.

Britain's second-biggest grocer said on Tuesday the new "Chosen by You" range of 3,500 products was based on extensive, nationwide testing and includes 500 new items such as red pepper and Wenslydale soup and sticky toffee ice cream.

Asda's own brands account for almost 50 percent of group sales, or about 8-9 billion pounds, with the core mid-tier range comprising the vast majority.

Over 1,000 products have been reformulated but prices are being kept on hold, said Chief Executive Andy Clarke, who described the move as the largest own-brand relaunch in British retailing history.

"No other retailer has moved so aggressively to seek not just the counsel, but the consent of the very people who buy and eat their products," Clarke told reporters, pointing to over 200,000 individual blind taste tests, involving about 40,000 Britons, and carried out by independent researchers.

"We're sending out a clear message that Asda will now drive as hard on quality as it does on price," he said.

Asda has lost market share throughout this year to rivals like J Sainsbury (SBRY.L) and Waitrose [JLP.UL], which have a reputation for quality and innovation. [ID:nLDE68D0O9]

Asda, which runs 377 stores, has also been held back by opening fewer new stores than most of its rivals.

That will change following the purchase of 193 stores from discounter Netto. Britain's consumer affair's watchdog, the Office of Fair Trading, is expected to rule on the deal this week, with analysts expecting only a small number of stores might have to be sold to address competition concerns.

In April, Asda unveiled ambitious plans to become Britain's biggest non-food retailer within five years, and to step up its expansion of smaller stores to boost its position as number two grocer behind Tesco (TSCO.L). [ID:nLDE64H0S5]

An Asda spokesman said the chain expected to expand the "Chosen by You" range to around 4,000 products early next year.

Clarke was promoted to chief executive in April, having previously been Asda's chief operating officer. (Additional reporting by James Davey; Editing by Rhys Jones, Mike Nesbit) ($1=.6403 pounds)