Food Producers become Victims of Supermarket Price War

Posted on 25 November, 2014 by Kirsten Kennedy

As supermarkets continue to squeeze prices in a bid to attract consumers and lift profits, retail industry analysts are becoming concerned about the impact this will have not only on the retailers themselves but also firms in their supply chains. This concern has been thrown into sharp relief this week, with the news that the number of food producers entering insolvency has risen sharply in the past 10 months.

PRICE WAR red Rubber Stamp over a white background.

According to the latest market research by Moore Stephens accountants, 146 food production firms have entered insolvency since January of this year. This vastly tops the 114 supply chain firms which went bust in the entirety of 2013, with further insolvencies expected to register before the year is out.

The figures are somewhat concerning given the fact that, in the year to the end of September, the number of general company liquidations fell by 8 per cent in the UK. This indicates that the issue lies not in the country’s economy as a whole but, rather, between suppliers or production firms and the retailers or customers buying their stock.

Moore Stephens partner Duncan Swift points out that, even in extremely tough conditions, food producers in the supply chain are unwilling to speak out against the supermarkets purchasing their goods.

He says; “The supermarkets are going through the bloodiest price war in nearly two decades and are using food producers as the cannon fodder.

“Supermarkets have engaged in questionable buying practices for years, but it’s getting worse and clearly wreaking havoc on the UK food production sector.
“The fear of losing business from supermarkets means that food producers rarely, if ever, complain about clear breaches of industry standards – that means there is no check on the highly aggressive buying practices of the supermarkets.”

This is not the first time consumers have had their attention drawn to the impact retail decisions can take upon the supply chain, as last Christmas a number of High Street retailers were criticised for demanding payment breaks from their suppliers. Debenhams, one of the chains involved, claimed that this was an “investment” to benefit both itself and its suppliers in future, but consumers at that point began to question whether retailers should have the degree of power over suppliers they currently have.

Although Moore Stephens resoundingly placed the blame for the uptick in supplier liquidations upon supermarkets, the British Retail Consortium (BRC) has argued that this is a very one dimensional way of examining the problem.

A spokesman said; “All major supermarkets know the only way to deliver consistent quality and value in a competitive market is by building long term sustainable relationships with their suppliers – that’s why so many suppliers have worked with the same retailer for so long.

“It is far too simplistic to blame retailers for this: there may be a number of reasons for failure and we don’t know if they supply retailers, and even if they do they are likely to have other customers.”

Do you agree with Moore Stephens’ assessment that supermarkets are actively damaging suppliers as a result of the supermarket price war?




Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Recent Posts

Interest Rates Impact on Commercial Property

Commercial Property Investment Outlook for 2023

The best places to stay on the Riviera

The latest property data has identified Newquay as the fastest property seller’s market in the UK

Investing in your garden can increase your property’s value

French Riviera temping high-end homebuyers

How can the ownership rights of my commercial property impact a business sale?

Should I incorporate virtual property viewings permanently?

Investment expected to increase across Asia-Pacific in 2021

UK property industry slows as the conclusion of tax break looms

BNP Paribas cautioned investors on Friday as debt-trading bonanza that increased its earnings this past year

Over 300,000 property purchases fell through in 2020 – we show the most frequent motives and the best way to get your house sale back on track

House Prices in the Capital Surpass £500,000

Optimism from the Bank of England’s chief economist

The most expensive commercial properties.

Businesses operating from shared premises will miss out on grants