Aldi is facing a revolt by suppliers after telling them it will pay 5% less for their products from the end of this month.
The tactics were described as “bullying” by one supplier – one of several that have threatened to stop supplying the hard discounter as a result. Suppliers received a letter this Monday from Aldi’s MD of buying, Tony Baines, telling them it required “a 5% cost reduction on the range of products you supply. We will implement this on deliveries from 27 July”.
Furious suppliers contacted The Grocer claiming Aldi’s demands were not feasible.
“We can’t take a 5% hit,” one said. “We will have to change the packaging or product and engineer backwards from there.”
Another said Aldi’s business model, which relies on a small number of manufacturers to supply its limited range, meant it couldn’t play suppliers off against one another in the way the big four could. Aldi was at risk of stock shortages if suppliers pulled out.
“We’ll just stop supply,” one said. “They’ve obviously decided a 5% reduction across the board would be very nice, thank you very much, and who will pay? The suppliers. But if enough suppliers refuse to supply them under the terms of this letter then in a few weeks Aldi’s shelves could be half empty, leading to a lot of unhappy customers.
“Is that a price they really want to pay?”
Aldi said it deserved better prices because it was offering suppliers increased volumes and a chance to share in its growth.
“We are looking to improve our cost base to support our activity and that will benefit all our suppliers,” Baines told The Grocer. “We’ve got to fight hard for volumes and we want to build our market share. Suppliers are keen for volume and we are one of the few retailers able to develop our sales. What we are doing is fair and reasonable, reflecting that we are offering higher volumes.”