An email from a Sainsbury's buyer to suppliers last week said it would be “replacing” any lines it “could not maintain margin on” from 1 June. And while Sainsbury's is thought to be the only multiple to have emailed its suppliers outlining its tactics, suppliers claim a number of other retailers are employing aggressive strategies to help cope with the duty increases.
“Retailers are making it difficult for suppliers,” one beer company insider said. “They are entering negotiations with an increasingly aggressive stance.” Another supplier claimed a strong relationship with retailers was needed more than ever, and that the 2% duty rise had placed a “significant burden” on the industry.
“Half our annual turnover now goes straight to the taxman,” complained another source.
S&N sales MD for off-trade Mark Gerken said the tax rise was being “keenly felt” by breweries, many of which were already running under capacity because of lower consumer demand.
“While we have already taken the difficult, but necessary, steps to address this issue, the pattern is being replicated by other national and regional brewers alike,” he said.
However, one beer company insider said the pressure was not unexpected and the letter he had received from Sainsbury's was not aggressive – it simply reflected a response to a tough market.
“We are not anticipating any real issues in maintaining a strong relationship with Sainsbury's or any other retailer,” the supplier said. “The duty was in line with our expectations, as is the response of the multiples.”
Off-trade beer sales fell 11% in the first quarter of this year, according to figures from the British Beer & Pub Association this week.