The retailer demanded suppliers paid significant sums of money or face being de-listed
ASDA used ‘aggressive tactics’ to demand suppliers paid significant amounts of money under the threat of delisting, a new report by the Groceries Code Adjudicator (GCA) has revealed.
An investigation by adjudicator Christine Tacon found ‘Project Renewal’, which was implemented by the chain in early 2016 also included demands for price reductions with suppliers given as little as 24 hours to agree to the changes and one supplier only given overnight.
Suppliers were threatened with delisting if they did not agree with demands made, with suppliers reporting being asked for up to 25 per cent of the annual turnover of the stock keeping unit (SKU).
“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, with periods of between four and eight weeks being reported to the GCA,” she said.
The report also criticised the supermarket’s use of a third party firm to identify cost savings as the retailer was still responsible for any code breaches that company made.
“Providing incentives to third parties to generate income or cost savings for the retailer may encourage behaviour inconsistent with [Groceries Supply Code of Practice] code compliance and the retailer’s values,” added Mrs Tacon.
The GCA concluded Project Renewal was not conducted in a ‘wholly code-compliant way’.
However, the report concluded swift action from the retailer to investigate, rectify any lump sum arrangements and determine appropriate notice periods for any delisting, meant it had averted an official investigation.
Sarah Dickson, Asda code compliance officer, said the supermarket took its responsibilities seriously.
She added buyers were given new training and it had re-emphasised a commitment to a ‘partnership-led’ approach including full compliance with GSCOP.
“We have also reduced our payment terms for small suppliers to 14 days and our larger suppliers are testing good faith receiving,” she added.
She also urged suppliers to raise any concerns they had with her.
NFU Scotland President Andrew McCornick said it showed how quickly a supermarket could drop fair dealing practices when looking into saving money.
“While the vast majority of farmers and crofters in Scotland will not have been directly impacted by this, the indirect consequences on the food supply chain will have been downward pressure on Farm Business Income which, for 2016, was 75 per cent down from 2010-11.
“The financial damage to suppliers and primary producers from this type of activity will never truly be paid back by Asda,” he said.
“Given the impact on suppliers from the practices unveiled in this case study, many will be surprised that this was not a full investigation with a consequent fine.”
He added the probe was evidence of the importance of the GCA to regulate the behaviour of retailers.
“This example clearly indicates that the GCA must be continued and the role strengthened to allow for regulation across the whole supply chain rather than just the relationship between a supermarket and processor.
“This is essential if we are to build trust and transparency from the farmgate to the shop shelf. NFU Scotland will continue to push for an extension of the GCA’s remit.”