Supermarket buyers are being forced to accept commodity-related price rises from their suppliers because of threats to withhold stock, The Grocer's latest survey of retail buyers reveals. In a reversal of the usual 'retailer bullies supplier' story, buyers are complaining that large suppliers are increasingly using 'tough guy' tactics to push through price rises. "In effect, some are saying 'take it or we won't supply you' and when it's a blue-chip market leader you've got no choice," says one. "We then have to decide whether to take the hit or to pass it on to consumers. When you look at the small margins overall, there's not a lot of leeway and if it is a product that draws customers to a store you can't not have it, nor can you afford to be 15%-20% more expensive than rivals." According to the survey, 70% of buyers say that suppliers have negotiated price increases unfairly. Rising commodity prices "It's frustrating that we're getting so much criticism chucked at us in the press," says another buyer. "We're always portrayed as the bad guys but if we go to suppliers to renegotiate terms they always ask what we can do for them. At the moment, they're getting what they want and we're getting nothing in return." Rising commodity prices, particularly for wheat and dairy, and higher fuel costs are having knock-on effects throughout the supply chain. The Grocer Price Index last month showed that food prices have leapt 8% in two years. This is despite record-breaking levels of price promotions in other areas, with a third of all goods on shelves sold on special offer last year. Cost pressures have led to reports of retailers aiming to keep their own finances under control at the expense of suppliers. Rumours abound about Tesco's so-called Project Iceberg initiative, under which suppliers apparently have been told they will get no price rises this financial year, while Asda has reportedly told suppliers to "do their own restructuring" to stop price increases being passed on. Marks & Spencer is said to have demanded discounts amounting to up to 6.5% from its largest food suppliers. At the end of last year, even Iceland said it would extend payment terms to 90 days, with a 2.75% settlement discount, although it was forced to back down when suppliers rebelled. Despite such attempts to keep costs down, 90% of retail buyers say that it is getting harder to keep a low price promise. No spare margin left There are increasing rumblings of profit warnings on the horizon because companies have no more margin left to absorb, and many experts are warning that smaller suppliers may go under. However, while all the buyers interviewed say the current commodity-related price discussions are putting a strain on their relationships with suppliers, many see themselves as the victims, especially when pitted against some major suppliers that dominate their category. "These tactics are not being used across the board and with many suppliers the justifications for the price variances are relevant and discussions are ongoing," says one. "But in some cases, suppliers are just shifting their problems on to us. It's a competitive market and my main concern is availability. They're threatening to shut off supply." Taking the mickey Another buyer agrees: "Most suppliers are just passing on general increases but others are really taking the mickey. One supplier in particular has pushed through increases totalling 15-20% in the past six months, while their competitors have done far less. They are definitely taking advantage of the situation in an underhand way and when it's a major blue-chip company, it's difficult to dispute because you need their products on the fixture. I'm sure I'm not the only one in the trade complaining about this." Smaller retailers in particular feel they are suffering in comparison with the might of the bigger players. "Tesco may not be finding it as tough as we do," says one. "For most suppliers, if they don't get a listing in Tesco, they don't have a market share. We just don't have that power." Buyers who work for the larger players concede that, while they may have slightly more bargaining clout than smaller rivals, they still have to negotiate. "Price rises conflict with our aspirations not to put pressure on our customers' pockets, particularly as purse strings are tightening," says one. Finding the best solutions "Suppliers may all be keen to pass on the full costs to us but there are ways of finding best solutions. It's a challenging time but buyer/supplier relationships are cyclical; sometimes it's one party asking, sometimes the other. If you accept that you can be better prepared with options." All the buyers pledge to delay passing on price rises to consumers for as long as possible, with only 30% willing to admit they intend to push through rises in the next two months. However, several others hint this is a distinct possibility in the future. Most buyers feel the price pressures will have long-term effects on NPD. "As we're trying to keep the fixture market-led, our focus is still on the core range, with availability the main concern," says one. "Most suppliers say they are having to cut their budgets in that area and I think future new product development will probably suffer."n