In the latest in our series exploring trading relationships, Amy Balchin looks at the value of an exclusive arrangement with a multiple
Putting all your eggs in one basket and agreeing to exclusively supply a retailer requires a certain leap of faith. But it is one that has paid off for English Village Salads. It has seen its turnover leap 26% from £103m to £130m since it embarked on an exclusive relationship with Asda two years ago. So what’s its secret?
Keith Hinchcliffe, EVS account manager, attributes much of its success to a mutual interest in forging a genuine partnership.
“It is one thing being dedicated, but we have taken it that one step further,” says Hinchcliffe. “From exclusivity to a partnership,” agrees Paul Farrell, Asda buying manager salads. He adds that the relationship with EVS is “the best example of what Asda is trying to achieve” - simplicity.
Five years ago Asda decided to change the way it worked with its fresh produce suppliers. There were too many, Farrell says bluntly. It needed to reduce the number of suppliers it used to simplify the supply chain, streamline costs and ultimately provide better value for the consumer. To that end it slashed its number of fresh produce suppliers from 250 to 20.
One of those that made the grade was EVS. The supermarket chain had been sourcing fresh produce from EVS for 10 years, but it became an exclusive supplier in November 2002.The relationship works because it is not just about exclusivity but collaboration.
Being just 45 minutes’ drive away from each other, Yorkshire-based Asda and EVS are in constant contact. “On a weekly basis I know what Keith’s business plan is and he knows mine. He will give me a range of the goods available including costs.”
Both stress that they work together to negotiate prices and Asda’s EDLP policy sits well with EVS, says Hinchcliffe. “This is not a new concept for us, but as we have progressed we have focused more and more on it.
“The way EVS wants to work is the way Asda wants to work - getting rid of unnecessary costs and working to the same goal.”
“We want to know the true cost of supply,” says Farrell. “We cut out unnecessary costs but reward participants. We work together to understand costs, reduce costs and ensure we give a fair return on investments.”
Asda’s priority is to give the best price possible to its customers, says Farrell, but not at the expense of the supplier. Indeed, despite falling prices in store, suppliers sometimes find themselves being paid more than they expected.
“Our aspiration will always be to be the best value - nobody is shy about that. What we are describing is the best way to do that,” he says. “We cannot scrimp on payments - that is no good for consistency or the long term. In theory we could pay suppliers more and still be cheaper.”
Hinchcliffe agrees that when EVS enters into pricing negotiations with Asda, there is always a degree of compromise from both sides.
“We work from the bottom up and the top down and meet in the middle,” he says. “It is about transparency and openness. There are no secrets, whether that is financially or otherwise. Any problem, no matter how big or small, is put on the table.”
Farrell and Hinchcliffe agree that this sort of flexible negotiation would not be possible if the supply chain weren’t as efficient as it is. Once the produce is harvested, packaged and labelled in the field, it is sent direct to an Asda regional distribution centre. Quality control is dealt with by the grower. This system is geared up to getting produce straight to the customer, with goods handled as little as possible, says Farrell.
“Many of our growers are dedicated to EVS and Asda. That’s why we are able to deliver an affordable every day low price. This focuses the grower on thinking like a supplier.”
This is a strategy Hinchcliffe supports. “We try to think like the retailer and the consumer - everything is geared towards the consumer.”
EVS and Asda also jointly negotiate transport and both have instant access to Asda’s perishable goods replenishment system to optimise availability, says Farrell.
“The ideal is 100% on-shelf availability. We could do everything right, but then the customer could still go to the store and find they cannot get want they want.”
Given the past success of the relationship, Hinchcliffe says he has no qualms about the company putting all its eggs in one basket as a dedicated supplier.
“We take a long-term approach to everything. We understand the Asda business plan. Our business is aligned and we check we are on track weekly and monthly and try to think ahead. It would very unusual for anything to crop up and stop us in our tracks.”
Both agree that customer focus, transparency between participants, mutuality, teamwork, and dedication are paramount, and that continuing to put these into practice will take the partnership forward.
“We will focus on what we have got on the shelves and consumer needs, looking at eating trends and developing products that meet these requirements,” says Hinchcliffe.
“Our primary focus is to improve the customer offer,” Farrell adds.“We will continue down the road of EDLP improving our supply chain. In the next five years we want to make it the most successful in the industry.”
Putting all your eggs in one basket and agreeing to exclusively supply a retailer requires a certain leap of faith. But it is one that has paid off for English Village Salads. It has seen its turnover leap 26% from £103m to £130m since it embarked on an exclusive relationship with Asda two years ago. So what’s its secret?
Keith Hinchcliffe, EVS account manager, attributes much of its success to a mutual interest in forging a genuine partnership.
“It is one thing being dedicated, but we have taken it that one step further,” says Hinchcliffe. “From exclusivity to a partnership,” agrees Paul Farrell, Asda buying manager salads. He adds that the relationship with EVS is “the best example of what Asda is trying to achieve” - simplicity.
Five years ago Asda decided to change the way it worked with its fresh produce suppliers. There were too many, Farrell says bluntly. It needed to reduce the number of suppliers it used to simplify the supply chain, streamline costs and ultimately provide better value for the consumer. To that end it slashed its number of fresh produce suppliers from 250 to 20.
One of those that made the grade was EVS. The supermarket chain had been sourcing fresh produce from EVS for 10 years, but it became an exclusive supplier in November 2002.The relationship works because it is not just about exclusivity but collaboration.
Being just 45 minutes’ drive away from each other, Yorkshire-based Asda and EVS are in constant contact. “On a weekly basis I know what Keith’s business plan is and he knows mine. He will give me a range of the goods available including costs.”
Both stress that they work together to negotiate prices and Asda’s EDLP policy sits well with EVS, says Hinchcliffe. “This is not a new concept for us, but as we have progressed we have focused more and more on it.
“The way EVS wants to work is the way Asda wants to work - getting rid of unnecessary costs and working to the same goal.”
“We want to know the true cost of supply,” says Farrell. “We cut out unnecessary costs but reward participants. We work together to understand costs, reduce costs and ensure we give a fair return on investments.”
Asda’s priority is to give the best price possible to its customers, says Farrell, but not at the expense of the supplier. Indeed, despite falling prices in store, suppliers sometimes find themselves being paid more than they expected.
“Our aspiration will always be to be the best value - nobody is shy about that. What we are describing is the best way to do that,” he says. “We cannot scrimp on payments - that is no good for consistency or the long term. In theory we could pay suppliers more and still be cheaper.”
Hinchcliffe agrees that when EVS enters into pricing negotiations with Asda, there is always a degree of compromise from both sides.
“We work from the bottom up and the top down and meet in the middle,” he says. “It is about transparency and openness. There are no secrets, whether that is financially or otherwise. Any problem, no matter how big or small, is put on the table.”
Farrell and Hinchcliffe agree that this sort of flexible negotiation would not be possible if the supply chain weren’t as efficient as it is. Once the produce is harvested, packaged and labelled in the field, it is sent direct to an Asda regional distribution centre. Quality control is dealt with by the grower. This system is geared up to getting produce straight to the customer, with goods handled as little as possible, says Farrell.
“Many of our growers are dedicated to EVS and Asda. That’s why we are able to deliver an affordable every day low price. This focuses the grower on thinking like a supplier.”
This is a strategy Hinchcliffe supports. “We try to think like the retailer and the consumer - everything is geared towards the consumer.”
EVS and Asda also jointly negotiate transport and both have instant access to Asda’s perishable goods replenishment system to optimise availability, says Farrell.
“The ideal is 100% on-shelf availability. We could do everything right, but then the customer could still go to the store and find they cannot get want they want.”
Given the past success of the relationship, Hinchcliffe says he has no qualms about the company putting all its eggs in one basket as a dedicated supplier.
“We take a long-term approach to everything. We understand the Asda business plan. Our business is aligned and we check we are on track weekly and monthly and try to think ahead. It would very unusual for anything to crop up and stop us in our tracks.”
Both agree that customer focus, transparency between participants, mutuality, teamwork, and dedication are paramount, and that continuing to put these into practice will take the partnership forward.
“We will focus on what we have got on the shelves and consumer needs, looking at eating trends and developing products that meet these requirements,” says Hinchcliffe.
“Our primary focus is to improve the customer offer,” Farrell adds.“We will continue down the road of EDLP improving our supply chain. In the next five years we want to make it the most successful in the industry.”
No comments yet