Management consultancy PricewaterhouseCoopers has called for stronger supply-chain collaboration in the UK, deeming it vital if the sector is to deal with “the new normal” in UK grocery as price volatility and stiff competition for UK market share prevail.

Stephen Oldfield, PwC agri-food partner, said: “Long-term volatility and short-term price shocks in the food and drink supply chain are set to continue. Dealing with volatility in availability and price requires urgent and business-wide commodity risk management led by the boards of UK food and drink businesses, and a collaborative approach with their major customers to manage the effects of price movement collectively.”

According to a PwC survey undertaken at a client forum last month around volatility in commodity prices, only a fifth of those attending said they had taken significant action, leaving the remainder not having really tackled the issue.

Oldfield said: “Companies in the middle of the supply chain need to address what they are doing to manage their exposure to commodity price and availability risk and be able to explain it to their supermarket customers. Together, they then need to reach an economically sustainable solution to the way they do business with each other and not deal with it simply at a short-term transactional level. In particular, in a period of short-term rising raw material prices, failure to recognise these issues could cause suppliers significant economic hardship.

“At the other end of the supply chain the supermarkets themselves are dealing with consumer pressure for quality and availability at a fair price to ensure they maintain or grow their grocery market share in the new normal of, what is at best, a static market. Product availability, price and quality are an absolute must to retain shopper loyalty and it’s just got more difficult.'

With product availability, price and quality provided as givens, those polled at the forum voted customer insight (53 per cent) as the most important requirement for retailers and their suppliers to succeed in the new normal environment, followed by innovation (27 per cent), and then convenience (16 per cent).

Christine Cross, chief retail and consumer adviser to PwC, said: “We are seeing a power shift in the retailer/food-processor relationship with price increases beginning to be passed on to the retailers. The volatility in the market has enabled manufacturers to justify price increases.

'However, the pressure on retailers to maintain extreme value to keep market share is unrelenting.”

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