OK, I’ll come clean. I’m a Tesco shopper at least twice a month. In farming, to admit you spend a sizeable chunk of your income with Britain’s biggest and richest retailer is rather like owning up to a having a nasty infectious disease.
The anger that surrounds Tesco within the industry is growing by the day. Many, like me, love to shop there but continue to be increasingly concerned that the tough tactics of the past have turned into something so much worse. Tesco’s actions now amount to aggressive bullying of suppliers and the current situation is untenable.
The retailer is fired up by a need to maintain profit against the worst downturn for years, plus continuing price wars with Asda and discount chains Lidl and Aldi. It is urging its cash strapped customers to buy its cheaper own label products ahead of branded food and it’s adopted an almost farcical assault on the very people who can help it during tough times – suppliers.
In the last week, a number of farmers have told us that through no fault of their own they have been brought to the brink of ruin by the superstore giant. There are examples of appalling bad practice in every sector – fresh produce, dairy, meat and vegetables.
There have been allegations of upfront payment demands, contracts cancelled at late notice, unilateral price cuts and heavy handed negotiations with third parties. Farmers are suspicious, confused, deeply troubled and terrified to challenge for fear of losing the business instantly It strikes me as demeaning that one of the world’s greatest business success stories and prominent UK brands should risk widespread condemnation because of greed.
Tesco’s turnover at £28bn is over half the total EU agricultural budget at £52bn. It’s annual profit of £2.85 bn is equivalent to £55m a week.profit, that is £328,000 profit every hour. It’s therefore not unreasonable to assume that competitive pricing for shoppers can be achieved at the same time as doing sensible deals with suppliers. Tesco can still make an exceptionally healthy margin and it does not need to cripple farmers at home and abroad along the way.
Tesco insists everything is above board and proper. In a patronising statement, it reminds us it cannot afford to jeopardise long term relationships and a sustainable supply base. Yet all the signs suggest that many of those long term relationships are already under threat. So why is there such misunderstanding between the retailer and farmers and can anything be done about it?
The Competition Commission has promised to create an ombudsman to police relationships between retailers and suppliers but there’s no guarantee it will have the teeth to really help farmers.
In the meantime, keeping the pressure up in a united challenge to Tesco may be the industry’s only hope. FW is collecting evidence of dodgy practices to encourage more responsible behaviour and improve dialogue. If you have any experience of retailer power going too far email caroline.stocks@rbi.co.uk or call 0208652 4915. All comments can be anonymous and will be treated in the strictest confidence. As Tesco likes to tell us, every little helps.