Asda has revealed that its programme to cut food packaging will save it £13 million this year and the money will be reinvested in price cuts.
The hard-cash figure will fuel the growing belief among retailers that environmental initiatives can improve the bottom line and drive customer traffic into stores. The price reductions will come in addition to the 9,000 cuts delivered already this year.
Speaking on the fringes of Wal-Mart’s annual shareholders meeting last week, Asda chief executive Andy Bond told Retail Week: “This [saving] is largely working in association with suppliers to use new technology, different materials and reducing the overall weight of packaging.”
Allegra Strategies project director Steve Gotham said that the £13 million saving is the equivalent of the cost to Asda of opening two small stores.
Innovations so far have included thinner plastic for salad bags, and coffee jars with thinner glass. By reducing packaging, suppliers are able to charge Asda less for their goods.
Asda started its programme of reducing packaging for its own-label food in March. In fact, £13 million is just the tip of the iceberg, because the grocer launched a similar 12-month programme last month to reduce packaging by 25 per cent for its own-label general merchandise goods, such as stereos, TVs and clothing.
The UK’s second-biggest grocer has initiated a host of other green initiatives, such as reducing road miles, and plans to send no waste to landfill by 2010.
Gotham said: “It is a win-win, because it sounds very good for the operators [supermarkets and manufacturers] and good news for consumers.”
He warned that some suppliers may be affected by a greater number of returns, if product ends up being more easily damaged by less packaging. However, he believed that all suppliers would eventually have to fall in line with the eco drive.
According to latest TNS figures, Asda is one of the fastest-growing UK supermarkets. Its market share grew by 8 per cent to 16.7 per cent in the 12 weeks to May 20.