As Asda was crowned Britain's cheapest supermarket for a record-breaking 11th year running at The Grocer Gold Awards this week, The Grocer learned of plans by the Leeds-based supermarket to lower the price of branded goods still further by leveraging for the first time the global might of parent company Wal-Mart.
Last week, during the annual Wal-Mart shareholders meeting in Bentonville, Arkansas, Asda executives including CEO Andy Bond and CFO Darren Shapland held meetings with brand owners such as P&G, Unilever and Kellogg's to hammer out worldwide supply deals that would lower the price Asda pays.
"There are some very positive signs from some of the global brands out here this week," Andy Clarke, retail director, told The Grocer.
Describing it as a big move, Clarke said that previously Asda had used Wal-Mart's power to negotiate deals on non-food and private label goods, but brands were new. "It's only a start but it is about setting frameworks, and I think we can look forward to global negotiation. As part of Wal-Mart I don't think we've really leveraged Wal-Mart's scale before." It was a move away from "pure country negotiation", he added.
Emyr Williams, chairman of Commercial Advantage Consultancy, said the deal could be mutually beneficial.
"In exchange for better terms, suppliers could negotiate benefits such as better distribution in developing countries, where their penetration is low," he said. "Wal-Mart have always worked hard at achieving that extra level in a relationship. I think what is probably new is Asda playing a part in that," he added.
With prices on the rise, Asda has made no secret of its desire to target big brands, whose margins are traditionally higher.
Explaining the rationale, Bond told The Grocer that countering the rising cost of food is every grocer's challenge. Asda is beating National Statistics' annual 7.2% rate of inflation in food, limiting the annual price increase to 4.1%, he claimed. And while the credit crunch had encouraged more people to shop at Asda, customers were also turning to discounters Aldi, Lidl and Netto, and Asda could learn about efficiency from them, he added. "They are extraordinarily good at providing a limited range at amazingly low prices.
"I am never worried about good competitors but they are competitors that all of us need to spend a little bit more time understanding and learning about because it is clear customers want to shop there."
Asda's record as the cheapest big four supermarket continued at this week's Grocer Gold Awards, trouncing its competitors with consistently low prices. It provided the cheapest shopping list for 35 of the 50 weeks covered by The Grocer 33's 2007/2008 survey, while Morrisons overtook Tesco to become the second cheapest supermarket.
Asda's price award was one of an unprecedented hat-trick of Grocer 33 awards scooped by Asda at the Golds - the first retailer to pick up the gongs for price, service and availability in the same year.
Asda had just 36 out-of-stock items over the year, compared with 57 at Tesco and Sainsbury's.
Overall availability fell, with 11% more out-of-stock items compared with last year.