The week after leading own label manufacturer McBride announced a 47% fall in UK pre-tax profit, a leading investment analyst revealed to The Grocer the tactics some suppliers were resorting to in the face of soaring commodity and fuel prices.
Pricing negotiations were becoming increasingly fraught, said the analyst. “You get to stalemate where you’ve got to refuse delivery to get your price increase,” they said.
“We’ve heard that from a number of companies. They have to say, ‘Your last delivery will be Friday if you don’t give us a price increase’. They are eventually getting an increase but there is a growing resistance among retailers. They don’t want to put prices up more than [rivals].”
The CEO of a major supplier confirmed he had considered refusing delivery in order to force the issue. “It has been extremely difficult and we have had to consider all options,” he said. “It is not good for either supplier or retailer when you get to that situation.” Last month, the UK MD of a big branded manufacturer told The Grocer he had been forced into the same situation.
“They put you in the position where you are forced to say ‘As of Monday I will not supply you’. You need cast-iron balls to say that. They take you to the precipice and make you look over before they will consider increases.”
However, a Tesco spokeswoman insisted it would never allow negotiations to reach such an impasse. “It is not good business sense in terms of getting products on shelves,” she said. “It would just not work. It is not good business practice to let a situation deteriorate that far. We work hard to ensure good relations with suppliers.”
Sainsbury’s also denied it had experienced any such problems with suppliers, while Morrisons said it worked “closely with suppliers to ensure fair working relationships”.