Asda is launching a major range rationalisation as part of boss Andy Clarke’s Project Renewal.
The retailer contacted its top 25 suppliers this week to discuss plans for a major SKU cull, a move that has all the hallmarks of Tesco’s notorious and ongoing Project Reset.
In the week Clarke confirmed plans to scrap Black Friday, Asda is expected to launch a major sales offensive ahead of next Tuesday’s Q3 results, having seen its like-for-likes fall by nearly 5% in June.
Last month an Asda source told The Grocer it planned to “park its tanks on the lawn of the discounters” by revamping its everyday pricing position, and it is understood suppliers have been told they can expect hikes in volume sales in return for reductions in range and cheaper prices.
Although the scale of the cull is not expected to be as large as Tesco’s, Asda is looking for a similar simplification in price and shopping experience.
“This has kicked off in the last few days. Asda has contacted its top 25 suppliers and told them it is planning a major range review,” said one negotiation source. “Having spent the last six months negotiating for their lives with Tesco, suppliers are now facing the same thing all over again with Asda. I think they will definitely have been closely following what has happened at Tesco and they will be saying to suppliers, look, you are giving Tesco best price, what about us?
“There are going to be a few grey hairs out there. Having been in the thick of Project Reset it’s now time for them to get a train ticket to Leeds.
“The policy is absolutely in line with Walmart strategy which is all about less is more,” added the source.
David Sables, CEO of Sentinel Management Consultants, said Asda had told suppliers they planned major reductions to the SKU count by the start of the year.
“The leadership have told buyers we want a 10% drop by January 2016. That’s an average SKU fall, of course. In some cases it may be that ranges come down by 20%-30% and others by just 2%-5%.”
Sables said Asda’s review differed from Tesco’s because unlike its rival it was not co-ordinated by consultants, with Tesco having employed Boston Consulting Group to oversee its reset. Tesco also had the backdrop of a major trading scandal to deal with.
“My understanding is this is more of a classic, buyer-led negotiation process and won’t have the same element of softly softly approach that Tesco had. It looks like it will be pretty much anything goes.”
Project Renewal has also led to a major review of Asda’s entire own-label range in a bid to improve its ‘Market Leading Value Proposition’ (MLVP).
Another source said: “They are reviewing every single own-label product, benchmarking it, and will then look at improving the quality to be best in class. All at the suppliers’ expense.”
As part of Project Renewal, named after the successful turnaround led by Asda boss Archie Norman in 1992, Asda is to slam the brakes on its plans for expansion into non-core areas such as click & collect and petrol stations, as well as slowing down its planned expansion in London.
Asda has pledged to spend around £600m revamping 95 of its stores but The Grocer revealed it also planned to launch a price offensive in a bid to get closer to the discounters and take on a more competitive Tesco.
“We need to simplify what we do by prioritising the first line of our strategy,” said Clarke