Asda to work with rivals

The Sunday Times January 14, 2007

Asda ‘to work with rivals’
Jenny Davey

ASDA and J Sainsbury, two of Britain’s biggest rival supermarket chains, have held exploratory talks about collaborating on a distribution centre.
The initial talks centred on a so-called consolidation centre — where branded goods are stored before being transferred to distribution centres.

Andy Bond, chief executive of Asda, has accused supermarkets of being “disappointingly slow” to collaborate and has tried to find ways for rivals to work together on non-competitive issues.

“We are a bloody competitive lot,” Bond told The Sunday Times. “But for green issues or saving costs we should find the balance between competition and collaboration.”

Asda said many distribution centres were not fully used and it might be possible to create efficiencies in the logistics and supply chain by working with rivals. “The whole of the logistics chain is one of the biggest areas of opportunity,” said Bond.

Asda may also be prepared to work with rivals on finding the most efficient way to reduce packaging and on sharing distribution lorries.

The talks between Asda and Sainsbury took place last summer. Sainsbury suggested a location in the north of England, but Asda’s immediate requirement was for the Midlands, so discussions have not progressed.

Sainsbury acknowleged that the talks took place but sought to play down their significance. Asda insists that the proposal is still a live idea.

News of the discussions came as it emerged last week that the preliminary findings of a Competition Commission probe into the £100 billion grocery sector had been delayed and were now unlikely to be released until the week starting January 22.

The initial statement from the Competition Commission will focus on supermarkets’ relationships with suppliers, planning issues and land portfolios.

In the run-up to the findings’ release, speculation has resurfaced that Tesco, Britain’s biggest supermarket chain, could be forced to sell off its land portfolio under the most extreme remedies.

Peter Freeman, chairman of the regulator, admitted last week that this was a possible outcome, but insisted that the Competition Commission was a long way from coming to that conclusion.

“There is no room for anybody to be complacent — when you do a root-and-branch review anything is possible,” he said.

But he added that he was resigned to not being able to please everybody.

Cryptically, he suggested that the initial findings might help to break down some of the current thinking about land banks.

Freeman said that all the evidence would be assessed “soberly” and the commission aimed to take the demonisation of individual supermarket groups out of the process.

Tesco is expected to deliver a bumper Christmas trading statement this week, with analysts forecasting like-for-like sales growth of between 5% and 5.5% over the festive period.