Farewell to the middle man as Asda takes import operations in-house

Behind the scenes the group is quietly killing off the middle man in order to access produce straight from suppliers all over the world.

The headquarters for the new regime – International Produce Limited (IPL) – is right in the heart of Asda's Yorkshire homeland in

Normanton where the group already employs more than 500 people and there are expansion plans ahead.

IPL is at the heart of Asda's plans to cut out the middle

man and reduce prices on imported products such as

melons, peaches, nectarines, oranges, bananas and grapes.

Asda says it is too early to quantify the savings it expects

to make from IPL, but says they will be significant.

Now the group has established IPL in fresh produce, the plan is to expand it into a number of other areas.

Former Asda food director Nick Scrase, who is now heading up the IPL business, said the group is starting to move into new areas such as

Italian cheese including feta, parmesan and ricotta, Italian filled fresh pasta and Belgian pat.

"The two most important people in the supply chain are the customers and the growers," he says.

"We are cutting out the middle men. We don't have importers based in the UK, IPL fill that role for us.

"We have offices throughout the world working closely with growers and exporters."

He added that the IPL system allows the group to purchase more efficiently and offer customers lower prices.

Mr Scrase said that the business, which is now fully owned by Asda, is now poised to move into non-fresh areas such as canned goods, dried goods, rice, pasta and confectionery.

"It will be a lot easier than chilled products," he said.

Asked whether the scheme will encourage imports and reduce local sourcing at a time when grocers are trying to cut down food miles, Mr Scrase said the focus will be on products that can't be bought locally.

"Where we have to import we are doing our best to cut down on food miles. We are using trains to import goods from Italy and in South Africa produce is taken by train from the growing areas to the coast. It's far easier to do because we have our own supply chain," he said.

IPL, which was formed five years ago as a dedicated supply partner for Asda, is now one of the largest importers of produce in the UK.

Asda chairman Andy Bond said that the decision to take IPL in-house last October is creating huge cost savings.

"IPL is now extending its activities into a wider range of products such as imported cheese, cooked meats, pat and pasta," said Mr Bond. "In terms of our operating model we've delivered a step change in cost savings."

Mr Scrase said that in addition to setting up a producer network, IPL is also taking its social responsibilities seriously. The company has set up a number of social funds where money from each box of produce is invested in training and education programmes in various regions.

These include a bursary scheme for undergraduates from underprivileged backgrounds in South Africa to attend Stellenbosch University.

It is also backing a "Recognition of Prior Learning" programme for farm workers who have skills such as tree management, but have no

certificate to acknowledge those skills

In Kenya, IPL is contributing 30,000 to help take underprivileged but talented children through University.

It has donated more than 120,000 into a social fund for Latin America and is currently assessing training and development opportunities for underprivileged children and adults in the horticulture industry.

As focus moves to Africa ahead of the start of the football World Cup, IPL said it has signed up to the UN Millennium Development Goals, which involves a commitment to grow produce trade from Africa by 30m between 2008 and 2013.The goal has already nearly been achieved.

Wal-Mart takes a global view

Asda's parent US retail giant Wal-Mart is focusing on international growth in a bid to offset weak spending in the US. Wal-Mart is also taking steps to offset the decline at home by offering some of the steepest price cuts in its history, made possible by its global buying power.

But analysts believe that Wal-Mart's international sales will outperform domestic sales. Domestically, the company is focusing on everyday basics such as T-shirts, socks and jeans instead of branded goods. It is also placing mobile technology and e-commerce at the centre of its expansion plans.

The internet is a key area. At the moment only the US, the UK, Brazil and Japan have e-commerce sites.