A report in British daily broadsheet The Sunday Times this weekend suggests that supermarket leader Tesco is facing a “supplier revolt over its drive to squeeze down prices”.
As reported on freshinfo and in FPJ over the last couple of weeks, Tesco has been calling many of its suppliers into its Cheshunt headquarters to ask them for cash contributions or lower prices to fund a price battle with its rivals in the big four, as well as the discount chains that have made significant inroads in the last few months.
The Sunday Times claims to have been told by one supplier that it is “engaged in ‘robust’ discussions to resist Tesco’s demands”, and that “several large suppliers to Tesco had held informal talks during the past few weeks to agree on some key arguments to fight the price cuts”.
Tesco claims that its suppliers have been making money during the period of food inflation that the supermarkets have now declared over, and that they are in a position to help their customer pass low prices onto the consumer.
But suppliers insist that Tesco is “selectively picking out some commodities” and ignoring the fact that many costs are considerably higher than they were 12 months ago.
The supplier told The Sunday Times: “We’re making it clear to Tesco that the broader picture is one of continued inflation on many commodities, not just the isolated examples they have been quoting.
“Everyone wants to see consumers benefiting in this environment but the hard reality is that the days of really cheap food are over. While some commodities are down from historic highs, the prices in the market for many key ingredients are still up on last year.”
Suppliers argue that there is a natural lag before a fall in commodity costs filters through to them, and that higher utility bills and packaging prices and an unhelpful pound-euro exchange rate continue to make life tough.
Tesco, which has also unilaterally extended credit terms from 30 to 60 days for some non-food suppliers, and counters that it is seeking better deals from suppliers on behalf of customers. A spokeswoman for Tesco said: “A year ago we worked to help suppliers when commodity prices were going up - now they are coming down it has to be a two-way thing.”
