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Below is a list of recent news items. For older items, see News archive.

 

8th September 2017 Press Coverage: The Grocer

Asda needs to follow Tesco’s example to keep in the GCA’s good books


Yesterday’s revelation that Asda had demanded millions from suppliers to finance its Project Renewal strategy – or face having their products stripped from its shelves – made for yet more X-rated viewing for the struggling Walmart giant.

In fact, the initial reaction upon reading Groceries Code Adjudicator Christine Tacon’s scathing report into a probe secretly dating back to March 2016, is just how lucky the retailer has been to avoid a full-blown investigation.

It was in February last year, before the Adjudicator began her trawl through the events leading up to yesterday’s condemning code clarification, that The Grocer first revealed suppliers were being asked for eye-watering payments. We reported how suppliers were asked to slash prices by up to 10% and invest huge sums in promotions funds. Meanwhile, Asda boss Andy Clarke, aided by external consultants Bain & Company, set about his summer SKU cull.

Yesterday’s report by Tacon shines light on the pressure that was put on suppliers, who in some cases were given 24 hours or even less to agree to such demands. And it has alarming parallels to the sort of behaviour that Tesco infamously found itself accused of in the Adjudicator’s first investigation two years ago.

So why has Asda escaped, and is the Adjudicator’s decision to hold back from the ultimate deterrent justified?

Tacon seems in little doubt that Project Renewal was in breach of paragraph three of the code, dealing with variation of supply agreements. And the evidence of “aggressive tactics” and threats levelled at suppliers will leave a very bad taste indeed, especially for smaller suppliers less equipped to stand up to such battlefield tactics.

Yet what is also clear is that under new broom Sean Clarke practices are changing for the better at Asda.

Tacon revealed how through internal inquiries, involving going through millions of emails, Asda had sought to root out such behaviour.

As well as repaying lump sums to an unspecified number of suppliers, Asda has given new training to all its buyers on the principles of the code. Rather than using it to screw suppliers, Asda is overhauling its previous dubious behaviour on Drop and Drive and has set up a new supplier helpline.

A recent survey by the British Brands Group showed Asda had made a step-change towards greater transparency on its code compliance, even if its behaviour still needs to improve.

Most fundamentally, the new Clarke at the helm has recognised that Asda cannot abuse its supplier relationships as the basis for a financial recovery. Again, there is a huge parallel here with the root and branch overhaul carried out by Dave Lewis at Tesco.

Asda now has to prove it can change its perception among suppliers in the same way Tesco did. But while there will no doubt be many suppliers disappointed at the Adjudicator’s decision to hold back from the nuclear option, the long-term benefits could be worth it if the sort of behaviour seen in Project Renewal is rooted out for good.

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5th September 2017 Press Coverage: The Guardian

Asda forced to repay suppliers after breaching fair dealing code


Grocer breached ‘overarching principle of fair dealing’, says industry regulator – but report stops short of calling for inquiry

A shopper in Asda
Asda was found to have ‘proactively engaged with suppliers to rectify any lump sum arrangements’. Photograph: Neil Hall/Reuters

The company, named as the worst supermarket in its treatment of suppliers earlier this year, was found to have demanded up front payments worth up to a quarter of the value of annual sales of particular products in order for suppliers to retain their place on the shelf.  

Some of those who refused to make these payments, which were greater than those agreed in suppliers’ contracts, were given notice that they would be ousted within as little as four to eight weeks, according to the industry watchdog.

The demands, reported by the Guardian last year, were in breach of the grocery supply code of practice – government-backed regulations that can attract a fine of up to 1% of UK turnover.

In a “code clarification” document published this week, the Groceries Code Adjudicator (GCA), said it had not decided to launch a formal investigation into Asda’s behaviour or issue a fine.

However the regulator, which oversees a government-backed industry code of practice, said a review had found that the Walmart-owned chain had breached “the overarching principle of fair dealing” in the code with conversations “designed to carry an implication of detriment if any supplier declined to agree” to its demands.

The watchdog said there was no need to launch an investigation. Asda had “proactively engaged with suppliers to rectify any lump sum arrangements, which should not have been made” and put further safeguards in place to prevent any further breaches.

The GCA report added that the project renewal strategy had been designed by a consultancy commissioned by Asda to achieve cost savings, and it was clear that “the role of the third party consultants was closely bound up with the issues raised”, as they had been able to achieve bonuses based on the amount of money they were able to save Asda.

The supermarket said project renewal, launched in late 2015 under former chief executive Andy Clarke, had been Asda-led with support from Bain.

Asda’s current chief executive, Sean Clarke, said: “Our mission is to save customers money through low prices by always securing the lowest possible costs built on a foundation of strong, trusted partnerships with our suppliers and absolutely in line with the groceries supply code of practice (Gscop).

“The matter raised in the GCA’s case study occurred over a year ago and since then we have significantly strengthened our Gscop compliance programme. We have engaged openly and transparently with the GCA to support her enquiries in keeping with her collaborative approach.”

Bain said in a statement: “As per our company policy, we do not speak publicly about who may or may not be our client.”

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3rd July 2017 Press Coverage: The Grocer

How the Adjudicator has changed grocery


The Groceries Code Adjudicator’s annual conference in Westminster carried additional significance this year as it marked the end of Christine Tacon’s first term and raised questions about the organisation’s long-term direction and future remit.

The organisation has undoubtedly had a positive impact on the grocery sector. Among the standout headlines in the latest GSCOP survey was that the number of suppliers experiencing potential breaches of the code has fallen by almost a third since 2014. The proportion now stands at 56%, down from 62% last year and a high of 79% in 2014.

Tony Baines opinion

There has also been a significant reduction in supplier complaints on thorny issues such as forensic auditing, unjustified charges and lump sum payments. But although the survey numbers are impressive, they don’t fully reflect the positive impact the GCA has had on grocery in the four years since it was launched.

Arguably, its most important achievement has been to bring about a change in culture and behaviour. It has encouraged supermarkets to reassess their relationships with suppliers to ensure there is a collaborative benefit for both parties.

The GCA has been effective in highlighting poor or unfair practices across the sector, which has resulted in a number of retailers changing the way they work with suppliers. This, in turn, has increased trust and transparency levels across the wider industry.

It was particularly pleasing to see a record number of suppliers participate in this year’s survey, including more than 500 suppliers to our business.

This is a clear indication that suppliers have the confidence to raise issues with the Adjudicator, which bodes well for the long-term future of Aldi and the wider sector.

From a retailer’s perspective, healthy supplier relationships that benefit both sides make sound commercial sense. This has been our approach ever since Aldi opened its first UK store more than a quarter of a century ago.

We believe in open, honest dialogue with our suppliers to give them clarity and stability in their dealings with us. This builds long-term relationships and allows us to provide great products to customers and a fair deal for our suppliers.

In practice this ensures that our suppliers do not make any financial commitments without a prior agreement from us on cost, specifications and volumes.

It means our suppliers are not placed under financial strain in supporting unnecessary bogofs, multibuy promotions or charges for better positioning of goods or increased shelf space. This keeps our sales volumes and buying patterns with suppliers stable and predictable through the year.

Thanks to this approach, we have topped the GCA’s survey for the fourth consecutive year, an achievement we are incredibly proud of, and one we are committed to maintaining by working together with our suppliers.

We believe the spotlight that has been focused on the relationships between retailers and suppliers is positive and something that the GCA deserves a huge amount of credit for.

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