Food suppliers see supermarkets as a threat to their businesses, with eight out of 10 expecting to see more companies within their sector become insolvent because of supermarket pressures, according to the results of a new survey.
The survey, which was conducted by Grant Thornton, said that suppliers blame their dwindling numbers on price pressure, excessive power, de-listing, and the refusal to re-negotiate prices in light of higher costs - all by the supermarkets.
The survey, which sought to probe the relationship between supermarkets and their suppliers, found that almost two thirds of suppliers operate without formal contracts with the supermarkets - as a result of which, almost a quarter of suppliers have had an order cancelled or reduced within 72 hours of delivery without compensation.
Some 20 percent of the survey’s respondents said that supermarkets regularly required credit for unsold goods, quoting reasons from poor quality and apparent damage, to the simple fact that the supermarket could not sell the produce.
The survey urged caution to suppliers who have no notice period in regard to their supply agreements - for 20 percent of the respondents, their notice period was purely on a verbal basis, meaning that supermarkets have few, if any, obligations if they were to de-list them.
The head of Grant Thornton’s food agribusiness recovery group, Duncan Swift, said: “Prompted by growing complaints, ranging from unreasonable behaviour to downright bully-boy tactics employed by the supermarkets with suppliers, the Competition Commission has, for some years, kept the UK grocery supply chain under its lenses. However, solutions to the major financial distress caused by the market power wielded by the major multiples on the supply chain have yet to emerge.
“As the Competition Commission has found, no current supplier to any supermarket is going to volunteer to put its livelihood in jeopardy by giving public evidence of market malpractice, as it’s only going to end in tears with a more than likely de-listing.
“Not having contracts in place, no notice periods, orders cancelled at the eleventh hour and penny pinching clients who, through their market power, constantly chip away at price and demand contributions and credits for unsold goods, is no way to be running a successful business. It is downright unreasonable and, if not stopped, it will continue to cause trade distortions that ultimately impact on the consumer through reduced choice and product blandness,” said Swift.
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