Sainsbury should get its own house in order rather than expecting suppliers to bail it out, said manufacturers after it emerged they had been sent letters demanding better terms.
Speaking after Sainsbury unveiled a 1.1% decline in second-quarter like-for-like sales, a company spokesman confirmed a letter had been sent out to more than 100 suppliers of general merchandise, fresh and ambient food asking them to “reappraise their opportunities to grow with Sainsbury”.
He added: “It is about growing the business and about opportunities for Sainsbury and for suppliers working with us.”
The move is part of a bid to achieve ongoing buying efficiencies of 100-150 basis points per year over the next three years. The letters, which asked for a 1% reduction in net invoice prices, received a mixed response. Several suppliers said they valued Sainsbury as a customer, but were not willing to reduce their terms.
One own label supplier said it would expect something significant in return: “We do not see ourselves as helping bail them out on a direct 1% basis. We will be looking to find ways we can create a win-win situation to help them meet what is an obvious need while also being commercially appropriate. There will have to be some tough negotiating.”
Others accepted the need for change but called for Sainsbury to approach negotiations in a more constructive manner.
One sales director said: “In the past Sainsbury has been aggressive and demanding, but it is a competitive market, and if you do not like it, get out. It would just be good sometimes to have some teamwork.”
Speaking at the IGD conference in London this week, Bill Grimsey, Big Food Group chief executive, said that calling for support from suppliers when your own strategy was failing was “just unacceptable”.
He said: “We get a new chief executive saying to the supplier base, you must support Sainsbury - what a load of nonsense.” He added: “They are looking for 150 points in buying margin improvement, so watch out guys.”
The demands came as Sainsbury’s new chief executive Justin King announced plans to grow sales by £2.5bn over the next three years. King plans to match market sales growth by the end of next year, grow grocery sales by £1.4bn, non-food by £700m and convenience by £400m by the start of 2008.
He also revealed 13 c-stores were to be sold or closed and the Savacentre and Central brands ditched and changed to supermarket or Local formats.
As predicted by The Grocer (October 2, p6) Sainsbury will also be axing 750 jobs, but will not be relocating from its Holborn head office because of the upheaval involved.
Amy Balchin & Elaine Watson
Speaking after Sainsbury unveiled a 1.1% decline in second-quarter like-for-like sales, a company spokesman confirmed a letter had been sent out to more than 100 suppliers of general merchandise, fresh and ambient food asking them to “reappraise their opportunities to grow with Sainsbury”.
He added: “It is about growing the business and about opportunities for Sainsbury and for suppliers working with us.”
The move is part of a bid to achieve ongoing buying efficiencies of 100-150 basis points per year over the next three years. The letters, which asked for a 1% reduction in net invoice prices, received a mixed response. Several suppliers said they valued Sainsbury as a customer, but were not willing to reduce their terms.
One own label supplier said it would expect something significant in return: “We do not see ourselves as helping bail them out on a direct 1% basis. We will be looking to find ways we can create a win-win situation to help them meet what is an obvious need while also being commercially appropriate. There will have to be some tough negotiating.”
Others accepted the need for change but called for Sainsbury to approach negotiations in a more constructive manner.
One sales director said: “In the past Sainsbury has been aggressive and demanding, but it is a competitive market, and if you do not like it, get out. It would just be good sometimes to have some teamwork.”
Speaking at the IGD conference in London this week, Bill Grimsey, Big Food Group chief executive, said that calling for support from suppliers when your own strategy was failing was “just unacceptable”.
He said: “We get a new chief executive saying to the supplier base, you must support Sainsbury - what a load of nonsense.” He added: “They are looking for 150 points in buying margin improvement, so watch out guys.”
The demands came as Sainsbury’s new chief executive Justin King announced plans to grow sales by £2.5bn over the next three years. King plans to match market sales growth by the end of next year, grow grocery sales by £1.4bn, non-food by £700m and convenience by £400m by the start of 2008.
He also revealed 13 c-stores were to be sold or closed and the Savacentre and Central brands ditched and changed to supermarket or Local formats.
As predicted by The Grocer (October 2, p6) Sainsbury will also be axing 750 jobs, but will not be relocating from its Holborn head office because of the upheaval involved.
Amy Balchin & Elaine Watson
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