With a potential competition investigation hanging over the retail sector, growers and suppliers to the UK supermarkets are beginning to raise their voices against what they see as unsustainable pricing strategies.
Several examples have arisen in the last seven days to suggest that sections of the supply chain are prepared to stand up to the UK’s major food retailers. They are demanding a return that more than covers production and distribution costs and allows growers to make a living in keeping with the quality of products they are obliged to provide to meet UK market specifications.
M&S stoked the fire last week, writing to all of its suppliers asking for up to 0.5 per cent “marketing allowance” from April 1. The chain said it is looking to its suppliers for payback on the benefits they have accrued from successful M&S ad campaigns. However, those suppliers who seen significant uplift in volume from the adverts, will be asked to pay a further unspecified charge.
One supplier said: “…it’s an aggressive and competitive marketplace - there’s significant price deflation and significant cost inflation - it’s really tough.”
Another source told FPJ: “We’re being squeezed all the time. The major multiples in this country want to maintain a margin because they have shareholders. They’ve cut off as much of their own fat and they’re now looking at the supply chain and reducing that to the bare minimum. We’re all down to our base levels.
“This will come straight off the bottom line and suppliers are not making big fat profits these days. I’ve heard overseas suppliers say that if it gets much worse, they’re going to stop supplying the UK market.”
NFU Scotland’s president John Kinnaird this week named poor farm-gate prices as one of the focal points for his union to tackle in the next 12 months. “We continue to fight for an effective Supermarket Code, to curb the misuse of supermarket power,” he said. “As the major supermarkets have grown in size, our ability to secure a viable return from the market has dwindled. We must recognise our responsibility to ensure we are delivering the right produce, at the right time to the right specification. But government and the supply chain has a responsibility to ensure the market does not fail farmers who do that.”
The call for action has been back up by grower groups overseas: Nigel Mudge, chairman of the Joint Pome Marketing Forum, in South Africa, claimed: “There is no longer a free market pricing system...there are more than 10,000 international fresh produce producers selling to 10 buyers in the UK and thus the power of the retailers has aggregated to such an extent that it is destroying the supply base. We need legislation to protect the producers before the producers disappear.” (p24)
And grape importers have also been pointing the finger of blame at the big four UK supermarkets, for a price-matching strategy that is bringing large sections of the supply chain to its knees. (p10)
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