Asda has warned national brand owners, including those in butters and fats, that more could be de-listed next year in favour of local suppliers if they fail to perform.
Asda executive board director Darren Blackhurst said the tightening economic climate and rising raw material costs would force the retailer to press for better value for money for customers. He was speaking last week at the IGD annual convention.
“There is a need for low prices for customers,” said Blackhurst. “We are not going to ignore this.” Referring to the “tyranny of choice”, he said: “I think it is becoming a real issue for customers and will have to be addressed by retailers. Hence, national brands will have to justify their existence.
“Customers want choice, they don’t want duplication. In 2008 we expect a slow-down and we are going to simplify our offering to customers. We need to make increasingly hard choices, which will have hard consequences for suppliers.” Blackhurst’s announcement follows Asda’s decision to de-list some branded canned fish lines.
Rising raw material costs would be “offset by operational efficiency” improvements in areas such as simplified replenishment of ambient products, he added. “Operational efficiency is the key to competitive advantage going forward.” And while he stressed that Asda would continue to heavily support British producers, he warned: “We cannot be held to ransom if other countries can produce to better quality and lower price.”
Asda would be looking to all of its suppliers to take cost out of the supply chain to meet these goals, he said. Responding to recent criticism of Asda’s low pricing policy which has seen chickens sold for just £2 each, Blackhurst said: “How can it be wrong to sell for less because you operate for less?”
Meanwhile he reported that Asda had spent £20M in removing additives from its own-label ranges, which it planned to achieve by January 2008.