Asda employs ‘art of war' against Heinz and Nestle
The struggling supermarket is locked in talks with some of its biggest partners as they resist pressure for aggressive cuts. Asda is calling on suppliers to 'share the load' in its price war, which is aimed at reviving its flagging sales.
Meetings are set to be held in the coming weeks in an effort to broker agreements with holds-outs, which grocery sources said includes some of the biggest names in the food industry.
Asda has re-hired retail veteran Darren Blackhurst as its chief commercial officer to spearhead the negotiations.
Mr Blackhurst, who spent four years in the same role between 2006 and 2010, has been tasked with rallying suppliers that have so far refused to concede. His approach to suppliers has been described by former colleagues as 'the art of war'.
An Asda source said: 'A lot of suppliers have been supportive. Others are more reluctant. It is about sharing the load. Some just haven't broken out of the four-week [temporary discount] promotion cycle.'
By increasing pressure on suppliers, the supermarket hopes to strengthen its price war against the likes of Tesco and Sainsbury's. Allan Leighton, Asda's chairman, wants his supermarket to be at least 10pc cheaper than rivals under its 'rollback' price-cutting plan.
However, some of the UK's biggest food producers have so far been reluctant to support the retailer as its sales continue to decline.
Despite Mr Leighton's ambitious price-cutting efforts since taking over in November, Asda's market share has fallen from 12.5pc to 11.9pc, according to Kantar. Sales volumes have also been shrinking.
Figures from NIQ seen by The Telegraph show that spending on groceries was down 4.6pc in the four weeks to May 17, compared to a 4pc decline over the year as a whole.
An industry source said: 'The idea behind 'rollback' is that you get the volume moving first, and then you get suppliers to invest further.
'But what's happened is that Asda has invested in rollback, and the volumes haven't come through. The suppliers are holding back investment because they aren't getting the guaranteed volumes they will need.
'There has to be something in it for them. If they are putting their money into Tesco and Sainsbury's, then they are getting a return. If they are putting their money into Asda, then there is no guaranteed return. It is high risk.'
The supermarket has argued that sales have turned a corner in recent weeks and bosses are hopeful that Mr Blackhurst can accelerate growth by getting more suppliers to lower prices.
'For creating chaos, he's great,' said a former colleague. 'We all know what Darren's box of tricks is, and that's bringing out the art of war.'
His impending arrival this month has already sparked concerns among some brands. The boss of one Asda supplier said: 'What we have spotted is that the buyers are not talking to anyone unless it is about money.
'We are just keeping our heads down because we fear that when the phone rings, that is what it's going to be about. The general background feeling is that it's desperate times, desperate measures, because they're a business in trouble.'
Asda has also been dramatically reducing its range in recent months in an effort to drive higher sales volumes for items that remain.
Mr Leighton said in March: 'It's pretty basic stuff, but it's there to grow the business, so what I'm saying is it's good for suppliers because they will get more volume.'
The fight to win over suppliers is crucial if Asda is to have any hope of restoring market share, which has been in freefall ever since the business was bought by TDR Capital and the Issa brothers for £6.8bn in 2021.
Mr Leighton said recent price cuts had helped Asda open up a price gap with its competitors, which helped the business record its strongest sales performance in a year.
'What we're looking at here is the business turning,' he said in May.
An Asda spokesman said: 'The material investment we are making this year to lower prices has already made a difference by opening up a 3pc-6pc price gap over other traditional full-service supermarkets.'
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