Asda has been forced to repay a six-figure sum to supplies after breaching the grocery code by using “aggressive tactics”.
According to the Groceries Code Adjudicator (GCA), the supermarket giant asked suppliers for “significant financial contributions to keep their business” with the retailer.
In some cases, Asda demanded that suppliers paid as much as 25% of the annual sales of certain SKUs in order to keep their space on its supermarket shelves.
The GCA, Christine Tacon, said some suppliers who refused to make the payments or were unable to negotiate a deal reported being given periods of de-listing as short as four to eight weeks.
Walmart-owned Asda also made other changes to existing contracts, including cost price reductions, which were demanded with as little as 24 hours’ notice, the watchdog said.
The demands, which occurred last year, formed part of Asda’s Project Renewal plan – a strategy designed to make cost savings, reduce product ranges and slash prices for shoppers.
Although the tactics were in breach of the grocery supply code, the GCA said it would not be launching a formal investigation into Asda’s behaviour or issuing a financial penalty.
The watchdog said Asda had “proactively engaged with suppliers to rectify any lump sum arrangements, which should not have been made”.
The GCA also recognised the role of consultancy Bain & Company, which Asda had commissioned to help draw up Project Renewal under its former chief executive Andy Clarke.
It said that “the role of the third party consultants was closely bound up with the issues raised”, since Bain was paid bonuses based on the value of cost savings it delivered to Asda.
The grocer’s boss Sean Clarke, who was drafted in from Walmart’s Chinese business last year, 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.”