Asda suppliers were asked to pay lump sums or face de-listing © Asda
Asda suppliers were asked to pay lump sums or face de-listing © Asda

Asda savings project 'not wholly compliant' with watchdog code

Will Green is news editor of Supply Management
19 September 2017

A project by Asda to deliver cost price savings was “not conducted in a wholly code-compliant way”, the supermarket watchdog has concluded.

In a report the Groceries Code Adjudicator (GCA) Christine Tacon said the project resulted in the variation of supply agreements that went against the principal of fair dealing in the Groceries Supply Code of Practice.

The supermarket began Project Renewal in early 2016. “It followed a difficult trading period and was designed to deliver cost price savings and range reduction,” said the report.

Suppliers began complaining to the GCA in March 2016 that “they were being asked for significant financial contributions to keep their business with Asda”.

“In some cases this was as much as 25% of the annual turnover of the stock keeping unit,” said the report.

“If they were not successful in negotiating terms on which to remain listed, some reported being given non-negotiable periods of notice of de-listing.”

Notice periods varied between four and eight weeks, while changes to terms of supply, including cost price reductions and routes to de-listing, were presented to suppliers as variations to agreed terms. Some suppliers were given 24 hours to agree any proposed changes and in one case it was overnight.

Project Renewal, which involved 226 suppliers, was under way when Asda was named the UK’s worst major supermarket by suppliers in the GCA’s annual survey.

The GCA had meetings with Asda in which Tacon raised suppliers’ concerns and the supermarket launched an internal review.

“It became increasingly clear that the role of third party consultants was closely bound up with the issues raised,” said the GCA. “The consultants were able to achieve bonus payments the more money they saved for Asda.

“It is not clear why certain material produced by the consultants was not challenged at any level within Asda, at design, delivery or implementation stages.”

The GCA ruled that because Asda accepted Project Renewal was “not conducted in a wholly code-compliant way” and it had carried out internal work to improve, there was no need to conduct an investigation or “require suitable remedial measures to be put in place”.

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