Shetland Smokehouse MD Dave Hammond is no fan of the British multiples. After a bitter experience supplying two multiples, he has vowed never to work with them again. “I am not afraid to put my head above the parapet and say this because I am not going to deal with them, whatever happens.” Two years ago Hammond found his chef-prepared seafood soups abruptly taken off shelf by Waitrose and Safeway, and replaced with own label.
“It was an inferior product. We tasted it and the ingredients were not pretty. Our product was really good,” he says.
In an environment of unrelenting price pressure, buyer demands and industry consolidation, Hammond says other suppliers are responding to supermarket heavy-handedness by turning away. But just how easy is it for smaller suppliers to make a stand and survive?
Earlier this year, Food from Britain flagged up the fact that British food and drink exports had grown for the first time in six years - 4.4% across all markets,with the biggest gains in Europe, up 8%. The stars are the added-value products, valued at £5.6bn and accounting for 63% of total exports, a figure that has been steadily rising since 2000, thanks to higher margins and less reliance on fluctuating world commodity markets.
Evidence, perhaps, that more specialist and smaller brands are beginning to ignore the big UK multiples in favour of specialist outlets in the UK and more profitable overseas markets. Hammond says: “All over the UK, not only in Scotland, speciality producers are
actively turning against the dictatorship and arrogance of the multiples.”
Shetland Smokehouse, which supplies stores in continental Europe, the US and Japan, as well as speciality health food stores and foodservice outlets in the UK, turns over £1m a year.
Hammond says he prefers dealing with overseas retailers. “The difference between UK and foreign supermarkets is like night and day. Outside Britain our retail customers’ primary concern is customer satisfaction and quality. The UK pays lipservice to quality, the reality is totally different.”
At premium salmon supplier Loch Duart managing director Nick Joy, who also has a beef and sheep farm, agrees that suppliers will not be able to put up with the price pressure for much longer. “Export markets will be tapped, while the British public will eat cheap imports,” he says.
For Loch Duart, the equation is a simple one: “We are not cost-driven so cannot supply the supermarkets. They really are not prepared to pay the price. The whole process is putting own label in disrepute.”
Saying no to the multiples or their supplier middlemen is an approach that more suppliers might take, agrees Walter Zanré, country manager for Filippo Berio.
Berio has the clout of a premium brand but it has still been hit by the commoditisation pressure triggered by Asda’s EDLP tactics. While a big player like Filippo Berio needs some supermarkets in the frame, it does not necessarily need all of them.
Zanré believes that in the near future some commodity suppliers will simply say enough is enough. “In some cases suppliers should simply say ‘no’,” he says. “Some smaller businesses can do things differently. Some make a huge error by agreeing to supply and then losing a lot of money, and if you have a lot of business tied up with one multiple, you can go under.”
The more clients the better, Zanré believes. And life can be better elsewhere, he says, even with major chains. “If you do a deal with a big UK multiple for 100,000 cases, you are not sure it will actually take them all. And if the retailer makes a mistake, the supplier pays.
“The German supermarkets are very difficult to get into, but once you have done a deal you know where you stand. In this country Aldi drives a hard bargain but after that it is a pleasure because they stick to it.
“Some international suppliers do not deal with the UK. They think it is more trouble than it is worth. And many think that own label business is bad business.”
Zanré says the continental chains are also more aware of supply-side and market factors such as the recent heatwave that has devastated continental crops. “If olive oil is short and you ask for an increase from Aldi, they will understand. In the UK the answer all too often can be no.”
Of course not everyone takes the view that the grass is greener overseas. NFU senior marketing advisor Stuart Thomson points out that suppliers can take their products to farmers’ markets and are likely to find a friendlier reception these days at the multiples with the advent of local sourcing programmes. He says: “Suppliers are finding themselves at the wrong end of the consolidation process, but there is more listening and understanding coming from the multiples. Five years ago they would have expected suppliers to switch overnight from one crop to another while today they realise that it takes three or four years to get a new variety of plum up and running.”
Unfortunately, for some suppliers securing alternative routes is beset by problems. In meat, export problems remain despite the diminishing legacy of BSE and foot and mouth.
Fresh produce suppliers have to work within the constraints of seasonality when it comes to export. And there are some retail chains abroad that, one hears anecdotally, are actually worse at dealing with suppliers than the British multiples.
But collaboration can prove a powerful tool for suppliers who are not prepared to wait around for things to improve. Salmon and seafood supplier H Forman is based in east London. MD Lance Forman points to the brochure for Forman & Field, his recently established and flourishing mail order service for fine fresh foods, from steaks and sausages to cakes and Cheddar, as an example of upmarket suppliers banding together to operate entirely outside the supermarket supply chains.
He urges more small suppliers to stand up for themselves on their home turf. “Small producers get screwed because they allow themselves to be screwed.”
Nevertheless, more small suppliers like Shetland Smokehouse are beginning to stand up for themselves.
And that may lead to one conclusion: unless the multiples engage in a more productive dialogue with these smaller suppliers, too many good British products will end up available only outside the supermarkets and, perhaps, only abroad.