Tesco has been accused of putting “extreme” pressure on growers and suppliers in an attempt to compete with budget retailers.
Growers claim the supermarket has introduced a raft of measures, including up-front fees, extra overrides and extended payment terms, in a bid to cut prices of fresh produce.
One grower, who asked not to be named, described the moves as “extreme”. Such robust tactics would put pressure on all aspects of the supply chain, especially primary producers, he warned.
Latest figures from grocery analyst TNS Worldwide revealed Tesco’s overall share of the grocery market has dropped as the credit crunch forces consumers to budget stores such as Aldi and Lidl in a bid to cut spending.
An industry official said Tesco’s response had been to “screw suppliers” and warned the supermarket’s tactics would put companies out of business.
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“Tesco can do what it likes because contracts don’t exist,” the official said. “By cutting margins and scrutinising every aspect of a grower’s business, it gets more and more difficult to make any money.
“There won’t be many people who have the financial ability to stay in business for very long, especially with the cost of borrowing going up. I think there will be a tipping point where even the most robust growers see this as madness.”
NFU president Peter Kendall said the pressure Tesco and other supermarkets were putting on suppliers to compete with low-cost retailers reinforced the need for an independent supermarket ombudsman.
“Aldi can sell at low cost because they’ve got a low cost base,” he during a speech at Reading University this week (10 November). “Tesco has a completely different structure and comparing the two is like comparing apples and pears.
“The supermarkets need to see the long-term future, not just go for crazy short-term wins.”
Failure to incorporate proposals for a supermarket ombudsman into a voluntary code of practice could result in compulsory regulation of the sector, although Mr Kendall acknowledged this could be a drawn-out process.
“We hope to hear something in the New Year. Hopefully, just the threat of a supermarket ombudsman could be enough to sharpen them up.”
A Tesco spokesman denied the supermarket had asked for changes in terms of payment and said “usual negotiations” were being held with suppliers.
“Commodity prices are starting to come down and it’s right to work with producers to see that is reflected in the price we pay so we can pass savings to consumers,” he said.
“All the negotiations have been carried out properly. It’s in our interests to have long-term relationships and a sustainable supply base and we won’t do anything to jeopardise that.”