Bond in the hot seat

This week The Grocer welcomed Asda chief executive Andy Bond as guest editor. While he was here, Chloe Smith took the chance to pin him down and put your questions to one of the most influential men in the industry

Indications from our trade contacts suggest a continued appetite for local food; do you agree with the prediction that this will continue, what is your five year forecast for the regional food sector and what role is expected for regional food within Asda’s own strategy? Louise Pickford, business development manager at Heart of England Fine Food

A: I think that our strategy will always be dictated firstly by customers and I would agree with the sentiment that Louise’s note infers that it will be a growing trend. I think I’m more than happy for us to share our five year forecast and I don’t have it on the top of my head but if she wants a number we can give her that. The challenges are really to ensure that local food continues to offer good value. And there are many reasons why people buy local food, but one of my simplest observations is when a local product is on our shelves and in so many cases it is irrefutably good food, but if it is twice the price of the alternatives it doesn’t sell. So I think one of the challenges in this area of local is how do you manufacture and deliver it at a good value price, and people I don’t think will be willing to pay significant premiums for it.

I am interested to know that as discounter supermarkets are on the rise and taking market share from the four biggest supermarkets in the UK, what is Asda’s plan to maintain and retain their customer base? Kitty Chio

A: As the Discounter 33 demonstrated, we are lower priced than the discounters, and one of the things is they are playing an important and growing role in the industry, a healthy and vibrant industry. I think there is some misunderstanding of their price positioning and you can shop at Asda and get lower prices than at a discounter, so our first role is to continue that strategy of providing great value. And actually in our own reading of the market data, the TNS data, the gains loss, we are roughly on a par with the discounters and what I mean by that is for every pound we lose, we gain [a pound].

In the loss gains analysis we are not haemorrhaging customers to the discounters anyway. But I do think we need to be cognicent of them because they are increasingly good, strong retailers. I think the whole purpose by which consumers use the discounters is misunderstood. It is not directly a substitute for a weekly shop at Asda, or Tesco or wherever.

Do you think that the trend for healthier drinks is here to stay or will these companies disappear as the credit crunch bites and consumers head to the fruit and vegetable aisles instead of paying for premium-priced smoothies? Ellie Williams

A: The reality is fruit juice sales continue to grow, so I think there is an indication there is an increasing demand for healthy drinks. With smoothies I think people were in times of affluence substituting what has been an extremely high priced product and making it an everyday product, and what has happened with smoothies is it has hit the brick wall because they are so relatively expensive compared with alternatives, the alternatives being, I’ll have a glass of Tropicana instead.

I don’t think what people are now doing is making smoothies from fruit, I think what they were doing is upgrading from fruit juice to smoothies and now they have downgraded again.

Moves by Asda to slash the price of bananas have been branded in the press this weekend as ‘shockingly irresponsible’. The price cuts are another blow for plantation workers and small farmers who thought that supermarkets had finally understood the social and economic consequences of pushing down prices. The move also flies in the face of evidence that most consumers want to know that the products they buy are not traded at the cost of decent wages and conditions in developing countries. Banana Link had thought that Asda/Wal-Mart was serious about trying to improve labour conditions in the plantations which supply the bananas you sell. But now, we have grave doubts. Can you reassure us that we are wrong to doubt the company’s seriousness on ethical trading? Alastair Smith, international co-ordinator, Banana Link

A: I can reassure them. I think the balance is always that we have got an obligation to our customers to offer basic items at the lowest price we can offer, but I absolutely want to reassure the guy that this is not at the cost of ethical standards and I want to reassure him that our retail pricing is not directly linked to our cost price negotiations and on the specific of bananas, we have not changed the pricing arrangements with our suppliers at all and it is a frustrating common misconception that when we drop our retail price we go back and ask for money from our suppliers. We will not be doing do in this case and we don’t.

When will Asda finally enter the convenience sector where their presence is so badly lacking? Not only will it give Asda great benefits including increased market share and allow you to reach a wider range of customer, but surely such a move would also allow Asda to enter areas where the company is not represented heavily at the moment e.g city centres nationwide and south east England. I understand the Asda strategy at the moment is to develop the Asda Living model but surely it would sensible to include city centre and convenience developments into your plans? Shaun Brown

A: It is an often discussed topic both within the company and within the media. It is important to get some context within convenience. We have made major strides in terms of serving customers that historically have no access to Asda through Asda home shopping, so as of this morning 95% of UK consumers can shop at Asda. So those who didn’t have access, a number of them now do. And we have got to weigh up the different ways of serving customers.

I wouldn’t say I never would. I never say never. But I think right now there are other priorities and there are some particular concerns we have got about convenience sector, not least no-one has entered that market and not charged a premium, so Tesco Express, Sainsbury’s, all charge a premium and that is a worry to me as a retailer that promised the lowest possible price. It is cost additive to your business because rents are high, distribution costs are high and it is questionable how profitable they are, and actually we have to be run as a business that has a shareholder. But never say never. One equals fifty. It requires 50 convenience stores to give you the economic value of one out of town store.

With the possibility of a carrier bag tax being introduced and customers reluctance to buy reusable bags (as free bags are given out on request) will Asda take the initiative and announce the imminent removal of single use carriers from its stores? Mr R G Taylor, Grimsby

A: This is a difficult challenge to navigate your way through because we have got slightly contradictory challenges. On the one hand we do recognise our commitment to being more environmentally friendly and I think one of the things to make people more aware of is while carrier bags are a massively important totem, they are a surprisingly small percentage of the carbon footprint of a supermarket. So I think we’ve got to commit to it, but I think it’s got to be more than carrier bags.

So one hand yes, we’ve all signed up willingly to the reduction, on the other it is absolutely the case that consumers have got to help us, because so many consumers have not yet changed their habits to be able to remember to bring back carrier bags or use reusable ones. So I think there is a real educational challenge and a long term change in behaviour. What I am reluctant to accept is that pro-actively we either remove bags, because that is bad customer service, and I’m equally reluctant to move to a position of charging for them.

So there is a real balancing act and it is a minefield to weave your way through, but specifically we have all agreed to reduce our use by 50% by springtime, and we are in  a lot of stores already taking free use carrier bags off display but they are there available if customers ask for them.

How can Asda claim to invest in price when retail margins remain constant at around 5% while supplier margins fall? When will retailers come clean and admit it’s actually suppliers investing in price? If supplier relationships are as good as they’re said to be, then there should be no poor practice to be caught by the Grocery Suppliers Code of Practice. Why, then, is its implementation being resisted? Anonymous supplier

A: On the latter part of that, there is no evidence there is breaking of the code of practise and unless the guy is willing to write to me personally and I can reassure him I take it very seriously, then I don’t know how anyone can expect us to investigate this claim of lack of implementation. It is such a general comment. I am willing to help if he is willing to write to me or email me. Or he can write to the CC or OFT.

On the issue of margins it is actually true based on a landmark piece of research by OC&C that over the last 10 years retailer margins have declined and supplier margins have increased. That is factually true. And then the other part of the point about how can we say we are investing in price, what actually happens is that because over time a number of supermarkets have grown in scale dramatically, then in effect we are using our efficiency gains to lower our prices. So the fact our margins have stayed flat is in itself a sign we have invested in price.

But if you take the profit pool over all retailer margins have actually decreased. He is specifically quoting me that in the last 10 years our margins have stayed roughly flat.

Thanks very much for improving my payment terms! Is there more help on the way for smaller suppliers in this difficult climate? Anonymous supplier

A: What a nice question! Yes. The great news is the best way we can help smaller suppliers is to grow our sales, and for them to grow our sales. And therefore a healthy Asda will lead to a healthy supply base. And the good news is we are doing well.

As a consumer I often think Asda’s ranging is too tight. Are you planning to widen the range? Anon

A: If the person would like to email me I will answer. But we feel we have broadened our range dramatically. The growth of our organics range, own-label, free-from, Great Stuff the kids’ brand, a lot of examples. But it is inevitable that if you are a particularly broad range consumer you consume a lot of different foods, it is almost inevitable no store will have everything you want on every occasion.

The frequency of buyer rotation is a real frustration. Just as communications have developed and we’ve worked out a strategy with a buyer, they’re moved on and the whole process starts again. Some movement (promotions etc) is obviously necessary, but a lot seems to just be shuffling. What more can you do to make things consistent? Anonymous supplier

A: It is a dilemma because any good healthy trading team will promoted people. And we do value broad experience. But I can also say I empathise with the point of view and I have heard it a lot, that buyers, not just at Asda but generally move to much and we will, and we have started to do is try and encourage people to stay in their job longer. One of the simple mechanics is, most companies end up incentivising people to move by paying people to move and you can create your remuneration packages so that you pay your best buyers to stay put. Some of your more ambitious people in your company are your buyers so they will always want to move up the ladder.

What is your attitude towards the tremendous fall in sterling? Are you amenable to amending pricing to reflect this new reality? Anonymous supplier

A: We try and separate our retail pricing decisions from our cost price negotiations. I would hope that we are tough but fair in negotiations with suppliers.

How much of a shift from fresh to frozen have you seen? Anonymous

A: We are definitely seeing frozen growth ahead of fresh growth. It depends how broad you want to make fresh food. Is it produce? Is it chilled? Certainly frozen is growing significantly ahead of fresh.

Is the “crusading celebrity chef” trend in any way aggravating for a supermarket boss – using their celebrity to influence eating habits? Don’t retailers know consumers better than celebrity chefs? Alex Beckett, food & drink editor, The Grocer

A: I think it is a mixed answer because the growth of celebrity chefs is all tied up in the groing interest in food. So I think the fact that people over the last 20 years have got a lot more interested in good quality food is good, so I think the celebrity chefs have added there. I think there are occasions where celebrity chefs are projecting themselves as experts in areas where they are amateurs. I’m not saying they are not knowledgable but yes I think there are areas of retailing where retailers do know better than celebrity chefs. The whole Jamie Oliver pigs and Hugh Fearnley-Whittingstall whatever his name is, on chickens. It is good drama and theatre on TV, it is not well researched, well presented balanced facts. And that is the problem of celebrity, what goes on with it is theatre.

I’m an ex-retired colleague of yours and really try my best not to comment or interfere at what happening at Asda since I left some three and a half years ago. But the thing that most annoys me about shopping in Asda is that when ever we go shopping on a Saturday (which is possibly the busiest day of the week) we have to almost fight to get to your roll-back bargains on both the power ends and often the in line aisles. It’s the gangs of home shopping colleagues picking orders. Brian Haigh, former senior meat buyer, Asda, now food industry consultant

A: I remember Brian! It is very nice he has recognised how busy and how successful we are, but I think he raises a fair point. But home shopping customers want as good a service and as fresh products as any other customers so you have to pick home shopping on the day. So you pick it on the day it is delivered, you can’t pick it the day before. However, it is worth me recognising there are improvements we can make to the timing and efficiency of those home shopping picks and we are currently doing a whole load of work to respond to the point he is making. There are ways of us making it more efficient so it is a fair question. He was one of our senior meat buyers.