Tesco buyers were this week said to be “furiously backtracking” as the supermarket held face-to-face meetings with suppliers over its controversial plans for a new fulfilment fee.
The Grocer revealed earlier this month the supermarket giant had written to suppliers asking them to pay new fees for online deliveries and its Booker wholesale businesses, claiming it shoulders too much of the cost.
Talks this week are understood to have focused on Tesco’s top 50 suppliers, with the supermarket continuing attempts to tone down an earlier threat that they could face range reviews or reduced prices if they refused to sign up.
“At Tesco buyer level there has been an awful lot of backtracking going on,” said Sentinel Management Consultants CEO David Sables.
“There have been plenty of buyers trying to duck out of conversations or saying I’ll refer your concerns to senior management.”
Another source said: “From what I’ve picked up from suppliers, Tesco’s buyers have been stressing that to them, margin is more important than securing this new fee. That adds to the theory that this was a way for them to start a conversation, an opening gambit, not the end game.”
The Grocer has also seen a letter from Tesco to suppliers reassuring them there will be “no consequences for you or your products as a result of you choosing not to opt in”.
Read more: Tesco promises no delists if suppliers refuse fulfilment fee request
Last week Groceries Code Adjudicator Mark White said Tesco’s move raised concerns over whether it was in breach of GSCOP, and appealed for suppliers to come forward.
Meanwhile, suppliers continued to vent their fury at Tesco’s move.
“In Ken Murphy’s statement at the supplier conference on 9 June 2022, he made it abundantly clear all cost price increases must be only based on product and packaging.” said one.
“He said we do not accept CPIs on operational costs, including but not restricted to energy, salaries and transportation.
“He reminded the audience that changes in operating expenses are ‘your responsibility to fix’.
“Almost in the same breath they imposed an immediate charge on supply. And now it wants to charge suppliers for changes in its operating costs.”
Another supplier said: “Tesco has been met with a barrage of nos.”
Read more: Explained: Does Tesco’s fulfilment fee fiasco break any rules?
Tesco is understood to have been working with Bain Global consultants on ways it can increase profitability of its online operation.
Mark Jones, a partner at Gordons LLP law firm, said: “In 2021, Bain & Co assessed the profitability of home delivery was only possible if grocers had a centralised fulfilment centre (aka Ocado) or charged a home delivery fee.
“For the most part, grocers don’t make much, or any, money from home deliveries. That wasn’t really a problem for the grocers in previous recessions, when there were price wars or when we last saw grocery inflation staggeringly high, like we did in 2009 when it was over 9%.
“At that stage, online sales accounted for about 3% of total sales. Now, online accounts for around 12%. So, if you are in Tesco’s shoes, you’d be thinking year on year we’re losing margin selling groceries online, but we can’t raise the prices in this market; yet suppliers still get the sales volume so it makes sense to share the burden of the additional costs.”
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