Tacon exposes Asda's supplier relations "as lesson to industry"

The Groceries Code Adjudicator (GCA) has rapped supermarket Asda for a consultant-led cost-saving strategy which she said breached the Grocery Suppliers Code of Practice (GSCoP), which she oversees.

Image: eastleighbusman (CC BY-ND 2.0)
Image: eastleighbusman (CC BY-ND 2.0)

In a case study published on the gov.uk website this week, Christine Tacon said Asda's Project Renewal, implemented in early 2016, "resulted in variation of supply agreements [paragraph 3 of GSCoP] and behaviour contrary to the overarching principle of fair dealing".

During this period, suppliers reported to Tacon that they were being asked for "significant financial contributions" of up to 25% of the value of product lines to keep their business with Asda, and being given very short periods of time, down to a day, to agree these.

Some suppliers which failed to negotiate such contributions were then de-listed, being given non-negotiable periods of notice of this of between four and eight weeks.

The GCA annual survey conducted during April 2016 indicated that issues with Asda were widespread among suppliers, and Tacon twice raised the issues with the retailer's Code compliance officer (CCO).

This prompted Asda to conduct an "extensive" internal review, which reported back in January - by which time it had "engaged with all its affected suppliers to rectify any lump sum arrangements which should not have been made and to determine appropriate notice periods for any de-listing", Tacon said.

"It became increasingly clear that the role of third-party consultants, who achieved bonus payments the more money they saved for Asda, was closely bound up with the issues raised," she added, noting that "certain material produced by the consultants was not challenged at any level within Asda".

By the time of the next GCA survey, which reported in June this year, Asda was found to be the worst-performing of the 10 GCA-regulated retailers for GSCoP-related issues experienced by its suppliers.

"Asda assured the GCA the lessons had been learned, and the results were a low point from which it now wanted to measure significant improvement," Tacon said.

Following a meeting between Tacon and recently appointed Asda chief executive Sean Clarke last month, publication of the case study was agreed, "to bring her enhanced engagement on Project Renewal to a close and to share points of clarification and lessons learned", she said.

Asda CCO Sarah Dickson responded: "We have re-emphasised our commitment to a partnership-led approach to relationships with our suppliers, full compliance with GSCoP and a simple, efficient way of working together.

"We have also reduced our payment terms for small suppliers to 14 days and our larger suppliers are testing good faith receiving. We have made sure it is quicker and easier for suppliers to raise concerns with us by re-establishing a single supplier helpdesk."

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