Dave Lewis had barely stood up at the IGD’s Big Debate and promised suppliers a better deal before news was leaking out that the supermarket has offered three-year fixed-margin contracts to its potato suppliers.
The move is remarkable as the notoriously volatile sector has long suffered with short-termism, with contracts tending to run on a year-to-year basis. It is unlikely to be a coincidence that it comes at a time when Tesco is establishing its Sustainable Potato Group, and the contract is aimed at offering suppliers protection from the inevitable fluctuations of the potato market.
The deal means a significant increase in supply for Branston, who will now provide an additional 85,000 tonnes to the supermarket from next year.
As always there are winners and losers: under the previous arrangements Branston had 40 per cent of Tesco supply, Greenvale 40 per cent and Albert Bartlett 20 per cent. Now, Branston has upped its share to 75 per cent with Greenvale, which will take on all of Tesco’s Jersey Royal supply from 2016, taking the remainder. Albert Bartlett has been frozen out.
Publicly, Branston only issued a brief statement in which managing director James Truscott said the company was “very happy with the agreement for a three-year strategic partnership, which is testament to the ongoing hard work carried out across the business and supply chain.”
However, Branston has also been detailing the new arrangements with growers, outlining the opportunity for the company to grow. “Earning this additional business brings increased responsibility for us to work with Tesco to develop and execute a successful category plan which will grow the overall potato business,” it said.
“Now, more than ever, we have the opportunity to make Branston the best and most efficient and sustainable potato supplier in the UK. We need to seize this chance and work together to make it happen.”
A spokesman for Albert Bartlett confirmed the company will no longer be supplying Tesco, but declined to comment further. Greenvale’s chief executive Angus Armstrong said: “While the reduction in volume is clearly a disappointment, we are pleased that we have been awarded a three-year agreement at a fixed margin and this is a major step forward for the business, reducing the impact of crop value fluctuations on company performance.”
The wider industry will be watching closely. One source described the move as a “groundbreaking” step for the potato trade, while another professed to be “a bit nervous of three-year contracts” and said the jury was out
on whether it would really benefit growers.
NFU Potato Forum chairman Alex Godfrey cautiously welcomed the move, pointing out there have been multi-year contracts before but adding that “there is a school of thought that more commitment would help investment, so from the producer point of view that would be good.”
All eyes will also be on whether Tesco extends the initiative across the wider fresh produce category. The retailer’s top brass has talked about supply chain rationalisation and more support for suppliers, and so far they are walking the walk.
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