I don't think anybody can say that they were not warned what was coming. For months now, we have been reporting how Asda's top brass was planning to get tougher with suppliers and look to rebuild the chain's status as price leader. Nevertheless, as Asda proves to be as good as its word, I can't remember a time when quite so many people have been quite so angry with one of their major customers. Not since, well... not since the last time a big retailer found itself backed into a corner and decided the only way to get out of its predicament was to squeeze the pips out of its supplier base.
That anger has been building for some time. In fact, the complaints started at Asda's recent supplier conference, where CEOs and commercial directors were asked to pay £150 each to attend a meeting in Harrogate on a Friday where the retailer's top team told them exactly how it was going to get more out of them for less. I think people just felt that was taking the piss. Now that the tough trading conversations are starting, that anger is, quite understandably, boiling over.
Irrespective of whether or not suppliers cough up, Asda's heavy-handed tactics will ultimately backfire because grumpy 'partners' who have been squeezed for cash and margin will probably go elsewhere with their innovations, promotional ideas and best products.
The very things, you may remember, that Asda boss Andy Bond was urging suppliers to provide so that the chain could inject some excitement back into the boring grocery market.
And I am not sure that slashing the price of bananas, milk or eggs injects much excitement into the market either. It certainly does not strengthen Asda's position on price. Instead, all that actually happens is everybody price matches within hours, value is taken out of market (one retailer told me it could cost his fresh foods team £45m in lost profit) and the overall volume of bananas sold in the land remains flat. Utter madness.
So who is the real winner in all this? Well, I bet Justin King can't believe his luck. Just as the Sainsbury chief executive is looking to accelerate the progress at JS, he can now see a stream of disgruntled people looking to give more support to a chain that has, pretty much, resisted the temptation to kick the crap out of its suppliers. Asda has, perhaps unwittingly, played right into his hands.

Topics