Supermarket slammed for ‘unscrupulous’ treatment of farm suppliers

Supermarket chain Asda has been slammed for its “unscrupulous” treatment of farm suppliers in the UK.

The latest investigation by the Grocery Code Adjudicator (GCA), a government body which regulates grocery supply agreements, found UK Asda suppliers had been asked to make “significant” payments to keep their business with the supermarket.

The GCA report explained that, in some cases, suppliers had been asked to pay as much as 25% of the annual sales of the product.

If they were not successful in negotiating new terms with the supermarket, some suppliers were given four to six week’s notice of de-listing.

Changes to terms of supply, including cost price reductions and routes to de-listing were presented to suppliers during their existing agreements with Asda, as variations to agreed terms.

Suppliers told GCA last year that they had been given very little time to agree to any proposed changes – sometimes as little as 24 hours and in one case, overnight.

The latest report clarifies several points of the GCA’s code so that the situation should not happen again.

‘Project Renewal’

A spokeswoman for the UFU said it is an “ugly reminder” to suppliers and farmers of what relationships with retailers could be like if left unchecked.

UFU President Barclay Bell said: “The GCA plays a critical role in helping to ensure there is fairness in the supply chain. Given the findings of this investigation it is clear that it is very much needed. In fact, we would argue that the GCA’s powers should be strengthened and the remit extended to include primary producers.”

The comments were made following the publication of the GCA’s investigation into Asda’s treatment of suppliers under its “Project Renewal”, which aimed to increase the retailer’s price advantage over competitors and strengthen its competitive position.

Bell said: “The GCA report makes it clear suppliers were paying the price for the retailer’s financial gains.

“The Adjudicator has rightfully concluded that Asda’s Project Renewal was not compliant with the Groceries Supply Code of Conduct.

Suppliers were being asked for significant financial contributions to keep their business with Asda and reported threats of being de-listed, as well as changes being made to agreed terms of supply with very little notice.

“This is totally unacceptable and cannot be tolerated. It’s because of these kinds of unscrupulous actions from retailers that we need an authority like the Groceries Code Adjudicator.”

Bell added that given the severity of the practices, he was “surprised” no fines or penalties were issued.

Major setback for farm suppliers

He said that the situation was a “major setback” to the industry’s relationship with Asda and added that it had “damaged the integrity of the retailer significantly” in the eyes of farm suppliers.

Asda’s Chief Executive, Sean Clarke, said: “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.”