13 April 2006 | Anusha Bradley

Asda has defended its decision to add promotion and cost-cutting expenses to suppliers' bills, describing its approach as "tough but fair".

SM understands some multinational suppliers have been asked to pay between £10 million and £60 million to cover advertising costs and keep their preferred supplier status as part of the supermarket's drive to improve its competitiveness. An Asda spokesman told SM: "We have a well-deserved reputation for being tough negotiators but fair to suppliers. The negotiations in the last couple of weeks with our major multinational suppliers is just business as usual.

"If a supplier wants to introduce 20 new products in the next year, then they should help pay for promotional costs."

He said Asda pays suppliers 3 per cent more than other supermarkets for the same products, adding that suppliers had also benefited from the retailer's 34 per cent increase in market share since 1999.

"Our buy-for-less programme is about negotiating and then agreeing updated business plans with our multinational suppliers based on our growth.

Marks & Spencer and Halfords have both recently slashed payments to suppliers and asked them to fund their advertising costs.

Robert Clark, senior partner at research firm Retail Knowledge Bank, told SM this was common when rising costs, such as fuel, transport and rent were uncontrollable.

He added mergers of large retailers, like Asda and Wal-Mart, meant they were in a better position to squeeze multinational suppliers, which held the balance of power in the past.

SMapr2006