Tesco’s Big Price Drop is being dubbed the Big Price Flop as suppliers report the retailer has been asking for massive sums to help pay the cost of the promotion.
Tesco had indicated the Big Price Drop would be part-funded by Clubcard savings, but suppliers have contacted FPJ to say they have been asked for huge contributions, with one firm saying the sums involved could send them bust.
“It’s just as we predicted would happen when the price cuts were announced,” one supplier said. “They have asked for a ridiculous amount of money, I mean an unfeasibly insane sum.”
He said it is not unusual for suppliers to contribute to promotions, but what is unusual this time is the size of contributions involved.
He added: “We are in the process of negotiating them down as much as we can. It is not over by any stretch of the imagination, but anyone who imagines Tesco will not get enough money to cover the cuts from their suppliers - well, that’s just wishful thinking.”
Another supplier said: “It’s fair to say that Tesco always ask for money - they call it a marketing investment. They create joint businesses plans (JBPs) that give us a year agreement with certain GSCOP (Groceries Supply Code of Practice) required stipulations.
“It creates the impression of supplier security and you build all the known knowns into that plan. You then get back to being a supplier but then what happens is top-down strategies like the Big Price Drop are introduced and that blows the JBP out of the water.”
A further source argued retailers’ pressure on price meant they could eventually miss out on supplies of imports, particularly if new markets for their produce continue to open up around the world. “The closer UK multiples get to the growers, the more the balance will tip and their unrealistic demands just won’t be met,” he said.
When asked about the supplier concerns a Tesco spokesperson said: “We talk regularly and constructively to our suppliers to ensure we are working efficiently together, as is standard business practice.”
The Big Price Drop has widely been dubbed the Big Price Flop in the national media after the publication of the supermarket’s latest quarterly figures, which show a 0.9 per cent fall in like-for-like sales. The promotion was said to be a £500 million investment.
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