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A Supermarket’s Perspective On Local Sourcing

Richard Pearson

General Manager, Local Sourcing & Ethnic Ranging

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Agenda

The strategic context

Local sourcing definition

Why it’s important to the customer

Asda & hubs

Our commitment to small suppliers

The future

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Asda’s Operating Principles

Mission

To be Britain’s best value retailer exceeding customer needs…Always

Purpose

To make goods and services more affordable for everyone

Values

Respect for the individual

Strive for excellence

Service to our customers

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Truly local stores

We sell for less

Stunning fresh food

20% Unique and Exciting

George - the value fashion

brand

Hassle free shopping with

personality

Our people….do it fast;keep it simple and

celebrate

The Strategic Context: Asda Formula For Change

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Truly Local Stores

People

Product Community

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People

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People

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People

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Agenda

The strategic context

Local sourcing definition

Why it’s important to the customer

Asda & hubs

Our commitment to small suppliers

The future

© ASDA 2007. COMMERCIAL IN CONFIDENCE: No reproduction, disclosure or other use is permitted without license.

Asda Local Sourcing Definition

Local Products are those which are:

• Made Locally • Grown Locally

– or

• Reared Locally – and are a

• Local Taste • Local Delicacy

– or

• Understood to be Local – and have

• Significant customer demand

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Product

National

Regional

Local

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Community

2006 Highlights

• £4.2m for Tickled Pink

• 195k for Everyman

• 390k raised for Children in Need

• 69,000 colleague hours in the community

• £2m raised for local charities through fundraising and bag packing in store

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Community

Bags for life

Green goodies for schools

Packaging reduction challenge

Walmart global commitment

Wal-Mart CEO Lee Scott Unveils "Sustainability 360"On February 1, Wal-Mart President and CEO Lee Scott unveiled "Sustainability 360" - a company-wide emphasis on sustainability extending beyond Wal-Mart's direct environmental footprint to engage associates, suppliers, communities and customers. The announcement was made during Scott's keynote lecture at the Prince of Wales' Business and the Environment Programme in London

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Community: Eat London

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Community: Eat London

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Agenda

The strategic context

Local sourcing definition

Why it’s important to the customer

Asda & hubs

Our commitment to small suppliers

The future

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Why It’s Important To Customers

“I think it’s good if you buy local because you know that it hasn’t been

freeze-dried or suspended in any way.”

“I think it’s good if you buy local because you know that it hasn’t been

freeze-dried or suspended in any way.”

“There’s a definite taste difference with local. You can

just taste that it’s fresher.”

“There’s a definite taste difference with local. You can

just taste that it’s fresher.”

“I like to keep local businesses going where I

can.”

“I like to keep local businesses going where I

can.”

• Support for local economy

• Perceived freshness & taste benefits

• Prefer seasonal availability

• Better for the environment

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Why It’s Not Important To Some Customers

“It keeps people in a job, but it’s too expensive to buy all the time”

“It keeps people in a job, but it’s too expensive to buy all the time”

“It depends what you call local. I’d always thought fruit and veg was local anyway…

because it’s fresh. It can’t really come from far away…can it?”

“It depends what you call local. I’d always thought fruit and veg was local anyway…

because it’s fresh. It can’t really come from far away…can it?”

“For locally grown things you’d go to the farm shop, if you were

that worried about that”.

“For locally grown things you’d go to the farm shop, if you were

that worried about that”.

“If it was the same price I’d buy local but if it’s

more I wouldn’t.”

“If it was the same price I’d buy local but if it’s

more I wouldn’t.”

• Implication of premium pricing

• Nice to have vs need to have

• All year round availability vs seasonality

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Agenda

The strategic context

Local sourcing definition

Why it’s important to the customer

Asda & hubs

Our commitment to small suppliers

The future

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Asda & Hubs: Plumgarth Hub Launch 2002

‘The Prince of Wales was encouraged by your partnership with Plumgarths in Cumbria . It is a model of how a supermarket can work with local farming communities to make a real and lasting difference and hopes it will be followed by others ‘

Sir Donald Curry ‘I am really pleased to lend my support to the ASDA/Plumgarth initiative and would call on other retailers and producers to follow this lead’

Spring 2006 “Best Business Initiative: Grocer Gold Award for regional hubs

2003 IGD Ian Maclaurin Award for Supply Chain Excellence

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Benefits Of Local Hubs

Local expertise

Store & supplier relationships

Food miles

Simpler for suppliers

Simpler for stores

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Agenda

The strategic context

Local sourcing definition

Why it’s important to the customer

Asda & hubs

Our commitment to small suppliers

The future

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Our Commitment To Small Suppliers

Top level support

Expanding specialist team

Better than standard trading terms

Direct to store or hub

One store at a time

Technical assistance

No costly technology needed

Minimum 12 week promise

Training & information

Marketing & PR support

© ASDA 2007. COMMERCIAL IN CONFIDENCE: No reproduction, disclosure or other use is permitted without license.

Agenda

The strategic context

Local sourcing definition

Why it’s important to the customer

Asda & hubs

Our commitment to small suppliers

The future

© ASDA 2007. COMMERCIAL IN CONFIDENCE: No reproduction, disclosure or other use is permitted without license.

The Future: The Customer

Increased demand for personalised offer & convenience

Increased demand for value on food basics

Increased demand for provenance integrity

Increased polarisation in shopping list requirements

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The Future: The Retailer

Race to capture niche to mainstream market share

Choices to be made around strategic range opportunities

Back to the future regional focus

Middle market suppliers under more pressure

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The Future: The Supplier

Choices to make about route to market risks & opportunities

Choices to make about local to regional to national expansion

Requirement for upgraded people skills

Challenge to face as national brands deliver provenance integrity

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Summary

Asda has total commitment to making its local offer work for stores, customers & suppliers

Customers will be relentless in their demands. To make the most of this opportunity, suppliers and retailers must up their game

Suppliers must decide what role they want to play within this process and invest in the necessary resource & infrastructure to deliver