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Producers face battle for shelf space

New warning for food suppliers as supermarkets slash prices

Kaye AdamsFood and drink suppliers have been given a fresh warning that they risk becoming victims of the supermarket price wars.

The number of producers in ‘distress’ has shot up by 54% in the past 12 months, according to restructuring firm Begbies Traynor.

Almost 9 in 10 of 1,622 reported to be in trouble are small or medium-sized suppliers and farmers.

Begbies blames the rise in distressed companies on supermarkets slashing prices and delaying payments to suppliers as they struggle to win back customers to the German discount chains Aldi and Lidl.

Gavin Darby, chief executive of Mr Kipling owner Premier Foods said in January this year that companies like his are likely to get more shelf space as the supermarkets trim their product ranges to focus on the best sellers.

Daily Business reported in February that Tesco would cut the range of products it sells by a third in order to tackle the discounters who have eaten into its market share.

Food suppliers rag outExperts at the time said 90,000 products were likely to be cut to around 65,000 to 70,000, enabling the company to cut costs and improve margins.

All the supermarkets are expected to focus on those big brand products that they can buy in bulk and which sell in bigger quantities.

Tesco, for instance, sells 28 tomato ketchup sauces while in Aldi there is just one ketchup in one size. By stocking fewer products Tesco will be able to cut prices and compete with the discounters. Tesco hired Boston Consulting Group to decide which products will have to go.

 

Begbies’ new report will add to a sense of alarm among suppliers who have worked to secure lucrative business from the big four.

Julie Palmer, a partner and retail expert at Begbies, said: “The food retail industry has never been tougher for the UK’s smallest food suppliers, independent grocers and farmers.

“Food suppliers are bearing the brunt of the supermarkets’ drastic turnaround strategies and the new savage landscape in the UK retail food industry.

“Clearly the novelty of a bargain continues to resonate with consumers. Unfortunately the retail environment is set to become even bleaker for the UK’s small food suppliers who are facing the harsh reality that price slashing is not just a short-term pain but something that’s here to stay.”

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