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Supermarket chain's latest threat

Tesco orders price cuts in new blow to food suppliers

TescoFood producers have suffered a further blow in Tesco’s battle with the discounters. The supermarket chain has written to 5,000 suppliers demanding they cut prices or lose space on its shelves.

The instruction follows earlier warnings reported in Daily Business that the company is planning to reduce the number of products from 90,000 to around 65,000 – a move that will see it focus on big brands and put a squeeze on smaller speciality food and drink producers.

A report today says Tesco wants suppliers to cut prices as a result of the fall in the price of commodities such as sugar and corn which have fallen in line with oil prices.

Last week, the Groceries Code Adjudicator announced it would be investigating Tesco’s relationship with its suppliers amid allegations that it was putting them under pressure to comply with certain orders that breached the code, such as delayed payments.

Tesco is also under the scrutiny of the Serious Fraud Office and the Financial Reporting Council over accounting errors that led to a huge black hole in its profits.

The deteriorating relationship with suppliers was highlighted in a Daily Business report  on 1 February (pictured). Dave Lewis, who was brought in from Unilever to take over as chief executive of Tesco last year, has called in Boston Consulting Group to determine what products to sell and which it should ditch.

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