UK supermarkets squeeze growers

Updated: 24/10/2008

Source: www.freshinfo.com - Fri 24 Oct 08

UK supermarkets are squeezing suppliers as they try to increase their margins and maintain value in the eyes of consumers.

Tesco has led the way in the last fortnight, asking suppliers to fund its bid to be Britain’s biggest discounter.

With more than 30 per cent of the UK retail food market, Tesco is implicitly issuing "take-it-or-leave-it" ultimatums to suppliers it claims have been making hay during food price inflation.

Tesco’s profit before tax for the first half of 2008 was 7 percent. The average profit margin for companies in the fruit and vegetable industry is between one and two per cent.

A Tesco spokesman said: “Our customers are facing tough times as a result of the current economic slowdown and they are looking to Tesco to help. They expect us to continuously negotiate the very best deals on their behalf.”

No supplier is willing to go on the record with comments for fear of immediate reprisals. some comments include:

“The margin they are looking to take out of the job leaves nothing for anyone else. They say they are obliged to keep food price inflation down on behalf of consumers and the government, but in reality it’s the supply chain here and around the world that is doing that”, said one supplier.

"There has been massive turnover in TESCO fresh produce staff, and it’s easy for new buyers to come in and butcher the supply base. They don’t know the fresh produce industry, so the lowest cost becomes the best deal, irrespective of the quality or service on offer.”

“They will only care when the last fall guy stops wanting to ... or simply cannot supply them any more. As long as they have product, the growers are not important.”