Sainsbury's overtakes Asda to become UK's No.2 supermarket

* Asda sales fall 2.7 pct in 12 weeks to July 19 - Kantar

* Sainsbury's now No. 2 player - Kantar

* Analysts say pressure mounting on Asda CEO Andy Clarke

* Asda says focused on long term

(Adds statement from Asda)

By James Davey

LONDON, July 28 (Reuters) - Asda, the British arm of U.S.

retailer Wal-Mart, on Tuesday lost its status as

Britain's No. 2 supermarket group to rival Sainsbury's

as industry data confirmed it as the sector laggard.

Asda's sales fell 2.7 percent over the 12 weeks to July 19,

reducing its market share to 16.4 percent from 17.0 percent in

the same period last year, researcher Kantar Worldpanel said.

That meant Sainsbury's overtook Asda with a market share of

16.5 percent, even though its own sales fell 0.3 percent in the

period.

All of Britain's so called "big four" grocers -- market

leader Tesco (Xetra: 852647 - news) , Sainsbury's, Asda and No. 4 player

Morrisons -- have cut prices in an attempt to stem the

loss of shoppers to fast-growing discounters Aldi

and Lidl.

The industry price war has hurt the big four's sales on a

value basis, as has record commodity-led food deflation.

Analysts reckon Asda is particularly suffering because it

has reduced prices without getting the boost to volume it was

looking for, reflecting a difficulty in attracting more upmarket

customers.

In May the firm reported its worst quarterly sales fall in

more than five years, but chief executive Andy Clarke insisted

its long-term strategy was the right one.

Analysts say the pressure is now mounting on Clarke (Toronto: CKI.TO - news) , the

longest-serving boss of a big UK supermarket after management

change at all of Asda's major rivals over the last year, with

the presentation of the firm's second quarter results on Aug. 18

seen as a possible crunch point.

"We're going through one of the toughest trading periods to

face UK supermarkets, so it comes as no surprise that industry

figures continue to be volatile from month to month," Asda said

in a statement in response to the Kantar Worldpanel data.

"We remain focused on our long term strategy for building a

sustainable business over the coming years. We won't make knee

jerk decisions because of the short-term picture."

Kantar Worldpanel said Tesco's sales declined 0.6 percent

over the 12 weeks, while No. 4 player Morrisons' fell 0.1

percent.

In contrast Aldi and Lidl posted sales growth of 16.6

percent and 11.3 percent respectively, lifting their market

shares to a record 5.6 percent and 4.0 percent.

Overall, grocery sales increased by 0.8 percent over the 12

weeks compared with a year ago, while grocery deflation was 1.6

percent.

"The continued slow growth of the overall market can be

explained by minimal volume growth and lower like-for-like

prices, both as a result of cheaper commodity prices and the

fierce competition between supermarkets," said Fraser McKevitt,

Kantar Worldpanel's head of consumer and retail insight.

He said prices were projected to start rising again by early

2016.

Shares (Berlin: DI6.BE - news) in Sainsbury's were down 0.1 percent at 1406 GMT.

Tesco was down 0.6 percent, while Morrisons was down 0.8

percent.

Market share and sales growth (percent)

12 wks to 12 wks to pct change

July 19 2015 July 20 2014 in sales

Tesco 28.5 28.9 -0.6

Asda 16.4 17.0 -2.7

Sainsbury 16.5 16.6 -0.3

Morrison 10.9 11.0 -0.1

Co-op 6.3 6.3 1.0

Waitrose 5.0 4.9 3.0

Aldi 5.6 4.8 16.6

Lidl 4.0 3.6 11.3

Iceland 2.0 2.0 3.0

(Reporting by Mark Potter)