Having been censured by the UK’s Groceries Code Adjudicator for mistreating suppliers in breach of the country’s code of practice on payments, the UK’s largest retailer Tesco is making significant changes to the way it works with its fresh produce supply base.
Eurofruit can reveal that the company has already started to introduce longer-term deals with a select group of suppliers, known internally as Tesco Partners, of which it expects ultimately to have a limited number worldwide.
These partners, which together represent all of Tesco’s mainstream fresh fruit and vegetable categories, will be granted longer-term contracts ranging from three to five years in length, apparently allowing them to plan further ahead and make the most of greater predictability in terms of their business with the retailer.
The changes have already taken effect on bananas, but the model is expected to apply eventually to most of the group’s produce categories.
In an effort designed initially to cut waste, Tesco has committed to taking all of the bananas produced by around 45 per cent of the plantations from which it sources, guaranteeing the fruit will either be sold in the UK, or through one of its other businesses such as Ireland or Central Europe.
In addition, the retailer has continued to reduce the number of suppliers it sources from for each fruit and vegetable category and, in some cases, it has invited certain suppliers to provide additional services including packing at source and logistics management.
By putting more product through a network of UK regional consolidation packing sites – linked to its transport network and run by strategic supply partners – Tesco wants to reduce its packing costs and overheads, increase quality and minimise rejections.
Packing more fruit and vegetables at source means that some of the group’s fresh produce suppliers – among them salads and vegetable supplier G’s Group in Spain – are now in a position to deliver direct to Tesco’s own distribution centres instead of sending consignments via their own packhouses.
Freedom to invest
According to Darren Clough, Tesco’s fresh produce category director for the UK, Tesco Partners will be given greater freedom to invest in their business.
Speaking exclusively toEUROFRUIT, Clough said: “We’re developing a programme where we will aim to give our strategic partners around the world three- to five-year commitments. Clearly, we have to have a little bit of flexibility and we won’t do that with everybody, but we are developing a group of strategic Tesco partners – some big, some smaller – with whom we’re going to have a longer-term collaborative and strategic commitment.”
He added: “We’ve just sat down in the UK with one of our key strategic potato suppliers to think about a three-year business plan to make their business more sustainable. This is one of the first partners we’ve done this with. We will have merit-based relationships, based on their ability, service, quality and cost. People will see the benefits of these partnerships: the partners will be able to grow, invest and have more certainty in their business.”
Clough also revealed that Tesco had introduced a scorecard for suppliers, designed to measure their performance in terms of quality, value, innovation, service and ethical position.
Asked how long the process of establishing such partnerships would take, Clough suggested it would be concluded within the coming months.
“The process has already started and our intention is to have more engagement with those partners, inviting them to work more closely and collaboratively with us over the coming 3-5 years in return for better and clearer governance, more strategic plans, joint investment, product development and new opportunities,” he commented.
“We’re also trying to be more helpful around payment terms, cash-flow and vendor financing, which is all about trying to take our business relationships to a better, clearer place.”
The full interview with Darren Clough will be published in the February 2016 issue of Eurofruit. To secure your copy, visit Fruitnet’s stand A-06 in Hall 6.2 at Fruit Logistica, or click here to subscribe and accessEUROFRUIT’s online and digital editions.
This article was amended following its publication to correct a statistic referring to the proportion of its banana suppliers from which Tesco guarantees it will take all of a plantation's fruit. The specific number of long-term partnerships Tesco expects to sign, originally reported as around 20-25 worldwide, was also removed.
