‘Deal between big retailers will be done off backs of suppliers’

July 12, 2018

MUTUAL NEED: “We buy British wherever we can while bringing value to our customers, post merger we will operating as two separate brands fighting for our customer base. We need the supply base as much as they need us as the retailer and they have to go hand in hand. We cannot be a successful retailer without a successful supply base.” – Chief executive of Asda Roger Burnley on the relationship with their suppliers following the announced merger with Sainsbury’s.

 

NOT CONVINCED: “You seem to be doing better than Sainsbury’s, so why this great desire to buy them? You are going to be a big beast in the market together and you going to extract more pain and it is not going to be just the (inter)net slaves of this world and it is going to be the smaller suppliers and that is where you are going to take it, isn’t it?” – Neil Parish, chairman of the Environment, Food and Rural Affairs committee, speaking to Mr Burnley and Sainsbury’s sustainable business director Chris Brown.

 

 

BIG cheeses of two big supermarket chains planning to merge into one would be profiteering of the backs of its suppliers, claims a prominent critic.
Former Somerset MEP Neil Parish and MP for Tiverton and Honiton Neil Parish accused Asda and Sainsbury’s of exploiting their smallest suppliers whilst the two big retailers saying they were doing it because their customers demanded cheap produce.

MPs grill Asda and Sainsbury’s over £51B deal

Chief executive of Asda Roger Burnley and Sainsbury’s sustainable business director Chris Brown faced the music during a three hour question and answer session of the Food, Environment and Rural Affairs committee in Parliament on 17 June. As well as Mr Parish, they were asked questions by Angela Smith, Labour MP for Penistone and Stockbridge, and DUP MP David Simpson.

The £51B merger between the two retailers was announced on 4 May. According to The Grocer, Sainsbury’s retain control of their brand via a £2.975B payment to Asda, whose parent company Walmart will in turn take a 42 per cent stake in the new company and two seats on the board.

‘Why did you desire to purchase Sainsbury’s?’

Committee chairman Mr Parish, addressing Mr Burnley, said: “Sainsbury’s tries to keep the middle end of the market. I don’t think you are natural bed fellows at all, it is really a marriage of convenience, it suits Sainsbury’s more than it suits you I suspect.

“You seem to be doing better than Sainsbury’s, so why this great desire to buy them? You are going to be a big beast in the market together and you going to extract more pain and it is not going to be just the (inter)net slaves of this world and it is going to be the smaller suppliers and that is where you are going to take it, isn’t it?

“Lidl and Aldi provide a better price to the consumer and a better price to the farmer. What you are proposing is quite the opposite.”

‘We need our supply base just as customer needs us’

Mr Burnley countered saying there were 400 suppliers in the food market for Asda, and 24 suppliers accounted for a third of all the items they sell and they are planning with the merger to buy an item for the same price. They have 1,700 suppliers who have a turnover of £250,000 or less.

Mr Burnley said: “Well over half of what we sell at Asda is British and much of which is non-food and comes from overseas. We buy British wherever we can while bringing value to our customers, post merger we will operating as two separate brands fighting for our customer base.

“We need the supply base as much as they need us as the retailer and they have to go hand in hand. We cannot be a successful retailer without a successful supply base.”

‘Your suppliers are terrified of you’

Mr Parish did not believe Mr Burnley and said their plans to make savings of 10 per cent through the merger would come of the backs of their suppliers, despite their assurances and intimated that suppliers could not complain about the fairness of their contracts as they were worried they would be just be terminated if they spoke out.

“You are talking a load of baloney, you would have to take most of that from the supply chain. Any smaller suppliers knows we have a Grocery Code Adjudicator but we all know they are terrified of you.

“Everyone will pay price of your ‘buy cheaper’ model’

“Why shouldn’t you sort your model out and be more competitive. Farmers have to be competitive. Lidl and Aldi have to be more competitive. Why is the supply chain that has to pay the price? I don’t think they will deliver the 10 per cent anyway.

“Your whole model is premedicated to ‘buy cheaper’ and by cheaper, it will be the producers, processors and everyone else will pay the price. We’ve got a huge problem getting anyone to say anything from a supplier to you because they are terrified so I don’t buy what you are saying.”

Mr Burnley said: “These suppliers will be supplying a successful retailer and grow together. It is not a zero-sum game. The suppliers can take of advantage of one packaging spec and one quality spec and there are efficiencies in dealing in one, overall construct.”

{ 6 comments… read them below or add one }

Lancashire Lad July 19, 2018 at 10:26 pm

This should not be allowed ASDA and Sainsbury’s and other supermarkets would eventually all merge into one supermarket. This can not be right. Competition, jobs and choice above the GREED of these mergers.

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DSCW Asda 1 July 19, 2018 at 10:27 pm

Sainsbury are more expensive than Asda so what is going to happen to the prices?

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DSCW Asda 2 July 19, 2018 at 10:28 pm

Supermarkets are about profit – screw the farmer to maximise profit.

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AW July 19, 2018 at 10:29 pm

I realise it can be difficult for many consumers – but, where possible, avoid the giant halal-supporting supermarkets.

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Citcat July 19, 2018 at 10:30 pm

Corporatism at its finest!!

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Richard Brown July 19, 2018 at 10:34 pm

The very big farmers will be left either with subjugation, or ending up being bought out by the supermarkets.
Smaller farmers need to find other outlets. The problem smaller farmers have is that they often won’t agree to work together. Of course, this must be done in a way which doesn’t bring the Competition Authority down on their necks.
One of my farming clients told me this story. Farmers in his area were so incensed over the reduced price of milk, that they agreed to pour it away in protest.
The owner of one, slightly larger, farm realised it was his chance to steal a march on the rest and quietly negotiated a deal.
That wasn’t in anyone’s interests in the long term, not even his. It’s that kind of behaviour that simply won’t do. I understand that French farmers are better at standing together.

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