Tesco says it is close to forging a series of long-term strategic agreements with suppliers that will help tackle supply chain volatility and ensure security of supply.
UK commercial director John Scouler told The Grocer this week that the schemes would be modelled on Tesco’s Sustainable dairy group with the new categories involved including meat and fresh produce.
The agreements would benefit both sides, he claimed: “Suppliers want Tesco to be successful. There is a mutual interest in that and I sense there is a real commitment forming on both sides.
“People assume that local sourcing is all about scale, but it’s also about skill. What we want is to have longer-term partnerships that cover risks on both sides.”
Tesco UK MD Chris Bush added: “Building clear and long-term relationships with suppliers is the most important thing for us. We are very serious about it.”
Tesco has had a strategic agreement with its dairy farmers for six years. It was set up during a period of major price volatility that sparked fears over the future security of supply. The retailer claimed the move had helped mitigate the impact of last year’s dairy crisis.
Last autumn, Tesco also entered an agreement with a committee of farmers overseeing direct long-term contracts for Aberdeen Angus beef and fresh pork.
“Tesco has been very active in trying to extend this approach across other sectors, especially meat, in the wake of the horsemeat crisis and fears over rising commodity prices,” said one leading supplier.
“I think the announcements that come will particularly impact on the meat sector. If you are a small producer and someone the size of Tesco is looking to form a strategic partnership with a group of suppliers, then you are going to want to be part of that.”