Tesco may have a love/hate relationship with farmers but it would be churlish not to acknowledge the retailer as a great British success story on a global scale.
It’s pre-tax profits of more than £3bn have drawn mixed feelings. Comments from forum users on fwi.space.co.uk range from the furious “its blood money, bled from suppliers” to the pragmatic “success comes at a price”.
Those farmers supplying the retailer are justifiably proud of their contribution and connection to the Tesco brand and the benefits it brings to the national economy. After all, it is a remarkable performance under terrible economic conditions and there’s the promise of another 11,000 new jobs created through store expansion. Let’s not forget that many farm businesses are expanding too as a result of this growth.
About one third of all supermarket sales are now made in a Tesco store and British shoppers, despite the recession, are still spending on food thanks to the quality and value offered by British producers.
But we are probably at the point where its dominance has gone too far. Primary producer margins have been relentlessly squeezed for years and Tesco’s image as a bully within the food chain is renowned.
Global brands thrive when they clearly demonstrate responsibility to their customers, suppliers and shareholders. In Tesco’s case it is the suppliers that are getting the raw end of the deal. Most consumers, even in difficult times, understand that cheap prices are not everything and that fairness to farmers is vital if we want sustainable food chains. Tesco’s proposition will never be as good if its cavalier methods force too many suppliers out of business.
Paying a price to all that fairly reflects the costs of production is a reasonable request that Tesco will not honour voluntarily. Therefore the only way of ensuring a more equitable approach is to introduce a supermarket watchdog with real teeth. The Competition Commission is to make a decision on an ombudsman and code of practice for the grocery trade any day.
Chief executive Terry Leahy and his opposite number at Sainsbury’s Justin King have lobbied hard against regulation but their greed may get the better of them.
A recent YovGov poll of shoppers found that 80 per cent were in favour of an ombudsman if it led to better treatment of farmers. Some 60 per cent were prepared to shop somewhere else to support the fairer retailers It’s funny how the big boys have selective hearing. If the customer is always right, why aren’t they listening?
For more Tesco analysis see Phil Clarke’s business blog at http://www.fwi.co.uk/blogs/agribusiness/2009/04/tesco-profits-prompt-abuse-and-admiration.html