What to do about the discounters? That is the question every grocery retailer is asking. (Or should be.) Sans online, sans click & collect, sans big data, the discounters are causing carnage.
“Supermarkets are threatening to delist suppliers who choose to supply the discounters. Do they have any right to demand loyalty?”
Adam Leyland, Editor
It’s a question every supplier (branded and own label) is grappling with too. Following Booker CEO Charles Wilson’s call to suppliers at the City Food lecture earlier this year to “go where the growth is,” Shore Capital analyst Clive Black reiterates this view in his column this week, while tempering this by pointing out that the discounters aren’t much interested in working with brands.
Of course, suppliers have been working with discounters for some time. Some openly. Some covertly. But the cat is out of the bag. And supermarkets and even symbol groups aren’t happy.
Supermarkets are even threatening to delist suppliers who choose to supply the discounters. ‘Who should I choose?’ suppliers are asking me.
Do supermarkets have the right to demand the loyalty of suppliers? No. Of course not. Especially when they are simultaneously setting up their own-label ranges against those same branded suppliers. It’s one thing to request exclusivity in support of a new brand. But it is hardly reasonable, when products are already for sale in numerous locations, to deny a supplier the right to trade in a particular channel, or with a particular retailer. Nor can they complain if they buy a product from a supplier at a lower price than the discounter receives, but are selling it at a higher price because they want a better margin. That’s business.
Where I have some sympathy with supermarkets is in the fact that they do at least support suppliers in stocking full ranges. That’s not a benefit you want to give away lightly as a supplier.
And I also have no sympathy for a branded supplier who sells an identical own-label product to a discounter at a price that undermines their brand, as UBUK was doing until recently with its McVitie’s Digestives.
It’s understandable wanting to work with discounters. But you also have to negotiate the right terms.