Asda is defending itself against accusations it has been asking suppliers from up-front cash payments.
Newspaper reports claimed the Wal-Mart owned UK supermarket group has been asking its main suppliers for cash payments, a move which has provoked fury among the supply base.
The reports, initially in the Financial Times, claimed big suppliers, including Mars division Masterfoods UK, Unilever PLC and Procter & Gamble, have been asked to pay to keep their preferred status, with payment thought to be from £10 million up to £60 million.
However, a spokesman for Asda defended the move: “We don't ever ask for payments from big multi-national suppliers without any kind of jointly agreed plan to achieve growth. We simply don't work that way.
“This is not about asking suppliers for a one-off payment of cash. We are sitting down with our key multi-national suppliers and agreeing joint future growth plans - as we do from time to time.
“We are a retailer that is gorwing, and we’re reinvigorating [our Buy for Less programme] to ensure the benefits of the growth our suppliers have seen over the past seven years (market share up 34 per cent since 1999) is fairly shared between us, suppliers and most importantly our customers,” he added.
However, the news has angered farming leaders, with Peter Kendall, president of the National Farmers’ Union, claiming the move demonstrates a complete disregard for the business pressure on producers and suppliers.
Kendall said: “I was disgusted when I read the reports. I find it sickening that this sort of thing is going on in full view of the Office of Fair Trading (OFT). In my view this is a clear abuse of power. Enough is enough, it must stop.
“This is symptomatic of the one dimensional approach to competition policy that is adopted by the OFT in relation to the grocery market. Unchecked, this situation is worsening as competition becomes more aggressive.
“The NFU has been concerned for some time that the OFT policy appears to be: If it looks good for consumers because it is reducing prices then it must be fair trade. The fact is, this sort of abuse of power is doing untold damage to the UK’s food supply chain and it appears to be completely off their radar.
“It cannot be in the long term interest of either the economy, or consumers, for the life blood to be squeezed out of the UK domestic food supply chain as part of the retailer’s strategies for gaining market share of the grocery market.”
