Supermarkets demand price cuts from suppliers

Supermarket chains are demanding hefty price cuts from farmers ahead of new rules governing the relationship between retailers and producers.

At least one of Britain’s big retailers has told suppliers it intends to slash farmgate prices by 15%, Farmers Weekly has learned. The news emerged just days before a strengthened grocery suppliers’ code of practice comes into force on 4 February.

Retailers who breach the code are likely to face significant financial penalties under government plans for a supermarket ombudsman. A 12-week consultation to decide how the ombudsman will enforce its powers starts on 5 February.

Terry Jones, NFU head of government affairs, said it was vital producers responded to the consultation to ensure that the ombudsman was proactive, robust and willing to name and shame retailers who mistreated suppliers.

“It is the first government consultation on the issue – rather than a consultation by the Competition Commission or the Office of Fair Trading – so we will need to make the arguments all over again so we can put in a comprehensive response.”

The NFU wanted to see an ombudsman that was focused on the code and didn’t sit back and wait for complaints, Mr Jones said.

Retailers have stated that it is not in their interests to treat suppliers badly. Very few farmers dealt directly with supermarkets, said the British Retail Consortium. An ombudsman would merely hand extra power to multi-national food businesses.

Mr Jones acknowledged this point. But it was possible that the ombudsman’s remit could be extended to cover other areas of the food chain, such as red meat and milk. It was likely that this idea would form a key part of the NFU’s consultation response.

The NFU would also continue to support a private members’ bill by Albert Owen, MP for Ynys Mon. It, too, would see the implementation of Competition Commission recommendations for an ombudsman to settle disputes between retailers and farmers.

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