Tesco Clubcard prices

Tesco has told suppliers it wants them to cut prices across its entire fresh and packaged products offer, as it launches the biggest range review since Dave Lewis’s Project Reset.

In a presentation, the supermarket giant told suppliers it planned to deliver a “new pricing policy across all tiers” starting this week.

It told a conference last week it expected them to work in partnership to drive the market from “inflation to deflation” in its new Fit for Growth strategy.

The reset, which also includes a sweeping range rationalisation and a new promotions policy, will begin with a category relaunch of its pasta and pasta sauces category. This will be followed by cereals, snacks, home baking, deserts and the free-from sector.

All Tesco’s remaining groceries sectors will follow later in the year.

The Grocer exclusively revealed in May that Tesco was planning the reset. The review will be led by internal teams, with the retailer keen to stress to suppliers at the conference that it had involved “no outside consultants”.

However, Tesco has made it clear it expected suppliers to drop prices. The presentation said the groceries market was moving from “inflation to deflation”, with the retailer claiming conditions were making it easier for suppliers to drop prices.

It cited a 50% drop in wholesale electricity prices, a 22% drop in plastic PET packaging prices, and an 84% fall in the cost of freight over the past year as factors that would enable suppliers to help it drop prices.

Tesco told suppliers the economic climate and the need to tackle inflation were the key drivers for the reset, but said Fit for Growth was also a chance for it to move ahead of its rivals.

In the presentation, the supermarket told suppliers it planned to “deliver a new pricing policy across all tiers”, as well as improve promotion effectiveness and remove range duplication.

It said phase two of the reset, expected to begin next year, would involve a major overhaul of Tesco “macro space”, with the retailer admitting it had fallen behind in some key areas such as world food.

Experts have warned the reset will have “huge implications” for its supply chain, amid a probe into alleged supermarket profiteering by the CMA.

It also follows controversial moves by the retailer to try to charge suppliers fulfilment fees for using its online and Booker wholesale services.

One supplier told The Grocer Tesco was trying to “put pressure on suppliers” to reduce prices.

However, they added: “Until the cost of energy and fuel returns to pre-Ukrainian levels, production costs will not fall.

“Whilst wholesale energy costs have fallen but not been passed down the supply chain.

“Tesco will dangle the usual carrot, ‘give us lower prices and we will deliver growth’, but I don’t think many suppliers will be queueing up for the opportunity.”

A Tesco spokeswoman said: “We’re working in close partnership with our suppliers to mitigate the impact of inflation as much as we can, particularly as commodity and input prices begin to fall in some areas. When we see opportunities to pass on savings to customers, we’ll take them, which is why we’ve just cut the price of more than 500 household essentials to help our customers reduce the price of their weekly shop.”