Milk

Sir: The price of milk has once again put supermarket/supplier relationships at the top of the news agenda (‘How price war made milk cheaper than water in mults,’ 10 January). I recall the pre-Christmas news that Tesco was renegotiating deals with over 3,000 suppliers. This strategy was widely lauded in the press at the time as introducing greater transparency but there was little discussion of what this might signal for its longer-term business plan. 

Several points need to be made here. Firstly, supplier arrangements can constitute up to one third of profits and anyone abolishing them will be taking a major hit to their balance sheet. Secondly, Tesco is likely to face considerable opposition from its more powerful suppliers. Lastly, there is potential for public backlash if Tesco is perceived to be going too far in negotiating down the prices of its small suppliers. 

Is this change of policy designed to enable Tesco to compete with discounters like Lidl & Aldi? If so it will be interesting to see whether it can adapt to this model, both financially and in terms of its wider stakeholder relationships.

Jeremy Cooper, head of retail and consumer brands, Crowe Clark Whitehill