Critics line up to attack Tesco
By Sam Fortescue
TESCO HAS drawn heavy criticism from suppliers after bursting through the 2bn profit barrier.
The retailer has reaffirmed its position as the UK”s leading food and groceries retailer, with almost a third of supermarket till receipts.
The group posted record underlying pre-tax profits, up more than 20% to 2.029bn on worldwide sales of 37.1bn. This is despite prices paid by consumers in the stores having fallen in real terms by as much as 2% over the year.
Tesco has found itself under fire from suppliers around the globe as well as City institutions over the results. Producers are concerned about falling prices and the high profits, while investors say earnings fell 1% short of expectations, causing the share price to wobble.
John Kinnaird, president of NFU Scotland, said supermarket buying power was threatening the vibrancy of rural areas by squeezing agricultural businesses.
“It is no coincidence that supermarket profits have risen at the same time as margins at farm level have been dropping. I am seriously concerned that unless we have a meaningful political move to ensure there is fair trade between farm gate and plate, small businesses, families and rural economies will pay a hefty price.”
The National Beef Association also warned that the quest for returns had opened up a “gaping hole” in the supply chain, as beef farmers hadf to turn out cattle for significantly less than cost.
“Everyone in the UK agricultural food supply sector recognises that the gap between retail profit and supply chain loss is so wide that the link between farm and supermarket cannot be maintained,” said chief executive, Robert Forster.
The Forum of Private Business, representing 25,000 small suppliers, criticised Tesco”s “bully boy” tactics in a stinging attack that claimed the retailer was ignoring codes of practice and “screwing suppliers into the ground”.
But a spokesman for the Country Land and Business Association said much of the growth at Tesco had come from non-food products and expansion overseas, although he did warn that the squeeze on domestic suppliers could only benefit imports, which would eventually push prices up for consumers.
Tesco”s chief executive Terry Leahy moved to pre-empt criticism, saying: “Our new growth businesses – in international, in non-food and in services – have contributed as much profit as the entire business was making in 1997.”
A spokeswoman said: “Tesco”s results are good news for our suppliers, our success means they can continue to grow alongside us.”