Sir; I read your coverage regarding Asda's new demands on suppliers with great interest (The Grocer, April 8, pp4 and 33).
It appears that Asda is fighting back in order to attempt to kickstart what has arguably been for the last two years a poorly performing business
Asda is using a very blunt tool to attempt to win back market share, ie: price. But for a significant proportion of the population price is not the key determining factor.
Asda's insistence on focusing solely on price is also starting to cause strategic issues for British food producers and suppliers.
Why do I say this? To drive the strategic agenda on price, Asda is intending to leverage its operating model by extracting improved terms from all suppliers.
For suppliers this is nothing short of a catastrophic scenario. Many are Asda-dedicated businesses that have already built dedicated facilities.
Margins will be destroyed, innovation stifled, and many primary producers are already losing money.
One has only to look at the cost of production for milk and most primary agriculture products to realise that soon there will not be a viable UK production base.
Yet what does Asda do? It cuts the price of milk.