Asda lags UK supermarket rivals as discounters march on

* Asda third-quarter sales fall 4.5 pct

* Aldi and Lidl's UK market share passes 10 percent - Kantar

* Asda boss says price cuts to exceed 1 billion pounds

* Sainsbury (Amsterdam: SJ6.AS - news) 's showing most resilience to discounters

(Adds comment from Asda CEO at media briefing)

By James Davey

LONDON, Nov 17 (Reuters) - Industry data and Asda's own

sales numbers underlined its position as the weakest performer

among Britain's largest supermarket groups, showing it is

suffering most from the rapid growth of discounters Aldi and

Lidl.

While Asda, the British arm of Wal-Mart, continues

to struggle, Tuesday's data from researcher Kantar Worldpanel

showed that Germany's Aldi and Lidl

achieved a combined 10 percent of the British grocery market for

the first time, having doubled their share in only three years.

"The discounters show no sign of stopping and, with plans to

open hundreds of stores between them, they'll noticeably widen

their reach to the British population," Kantar Worldpanel's

Fraser McKevitt said.

Asda Chief Executive Andy Clarke signalled that the price

war waged by Britain's "big four" -- market leader Tesco

, Sainsbury's, Asda and Morrisons -- to

lure back shoppers from the discounters is likely to intensify

next year.

Clarke (Toronto: CKI.TO - news) launched a five-year strategy in 2013 focused on

lower prices but eschewing the money-off vouchers touted by

rivals.

He said the company would now spend more on price cuts than

the 1 billion pounds ($1.52 billion) previously forecast in the

plan.

"How much we invest will only continue to rise as we narrow

the gap with discounters and widen the gap to the other three,"

he told reporters.

Clarke, who last week announced that Asda would not

participate in "Black Friday" promotions this month, forecast a

"tough" Christmas and said that 2016 will remain "very

challenging".

Plans announced last month to accelerate investment in

larger stores and put expansion on hold elsewhere should get

Asda back on track, he said, adding that he is also reviewing

Asda's ranges and plans to withdraw about 10 percent of products

"to remove duplication".

"We're in this for the long game," he said. "Asda is a

business that's got sustainable long-term growth in this market

and that's something we can be confident about.

"That may not be the case for all businesses, as we know the

market will consolidate."

VULNERABLE

The price war and commodity-led food price deflation has

been largely responsible for falling sales at all of Britain's

big four chains.

Asda has declined most of late, partly because it has more

customer overlap with Aldi and Lidl in its northern England

heartland, where the economy is also growing more slowly than in

the south east, where Sainsbury's, Lidl and Waitrose are

stronger.

Some analysts view Asda as most vulnerable to improvements

at Tesco (Xetra: 852647 - news) and Morrisons, both of which have appointed new bosses

to lead turnarounds.

Kantar Worldpanel said that Asda's sales fell 3.5 percent in

the 12 weeks to Nov. 8, with its market share down 0.7

percentage points year on year to 16.4 percent.

Separately, Asda reported third-quarter sales at stores open

for more than a year down 4.5 percent. That year-on-year decline

for the three months to Sept. 30 was only a marginal improvement

from the 4.7 percent slump in the second quarter that Clarke had

described as the company's "nadir".

Though Asda's sales are falling, it has not reported profit

declines and asset write-offs suffered by all its listed British

rivals, who have also sold assets.

Parent Wal-Mart did warn on profit last month, blaming

higher spending on wages, e-commerce and price cuts, but it

reported stronger than expected quarterly earnings on

Tuesday.

Tesco sales fell 2.5 percent and Morrisons by 1.7 percent,

the Kantar data showed, in stark contrast to Aldi and Lidl,

where sales soared by 16.5 percent and 19 percent respectively.

Sainsbury's, which has shown the most resilience to the

discounters, lifted sales by 1.5 percent over the 12 weeks and

its market share by 0.2 percentage points to 16.6 percent,

regaining its status from Asda as Britain's No.2 grocer and

sending its shares up 1.8 percent.

Kantar Worldpanel said sales growth in the overall UK

grocery market was 0.5 percent, held back by a 1.7 percent fall

in prices.

Market share (percent) and sales growth (percent)

12 wks to 12 wks to pct change

Nov 8, 2015 Nov 9, 2014 in sales

Tesco 27.9 28.7 -2.5

Asda 16.4 17.1 -3.5

Sainsbury 16.6 16.4 1.5

Morrison 10.8 11.1 -1.7

Co-operative 6.3 6.2 1.5

Waitrose 5.2 5.1 2.7

Aldi 5.6 4.8 16.5

Lidl 4.4 3.7 19.0

Iceland 1.9 2.0 -0.6

($1 = 0.6574 pounds)

(Additional reporting by Emma Thomasson,; Editing by Keith Weir

and David Goodman)