At the height of their power and influence before the recession, the big supermarkets looked unstoppable.
They had spread to the point where almost every postcode in the UK had a Tesco, consumers appeared to be abandoning the high street in droves, and suppliers said there was little they could do to prevent the supermarkets demanding whatever deal they wanted. What the supermarkets wanted, the supermarkets got.
A lot has changed since then. The big weekly supermarket shop is no longer as common as it once was, the pressure on household budgets means we are all much more savvy about shopping online for the best deal, and for the same reason, more and more shoppers are switching from the big four supermarkets to discount alternatives such as Lidl.
The supermarkets' response to this change has been to cut prices, which is obviously good for customers but sadly has done nothing to improve the situation for the long-suffering suppliers. As the power of the supermarkets started to wobble, we might have expected some rebalancing of their relationship with the suppliers, but instead, according to the most recent research, the price war appears to be increasing the pressure on the little guy even more.
The figures are shocking. According to the Red Flag Alert research by Begbies Traynor, there were 1,414 UK food and drink manufacturers in significant financial distress in the first quarter of the year, which is 94 per cent up on a year ago. There has also been a significant increase in Scotland in the same sector, with the number of firms in serious trouble almost doubling since 2013.
Begbies Traynor says a key factor in explaining these figures is the supermarkets' price-cutting strategy. "With £1 deals for fresh produce goods such as bread and milk remaining a firm feature at the major supermarkets," said partner Julie Palmer, "it's no wonder that suppliers lower down the food chain are struggling to achieve a fair price for their produce."
Fixing this problem and achieving a fair price for suppliers will not be easy. Suppliers may feel dominated by the supermarkets and bullied into unfair deals, but the supermarkets also represent their biggest markets; suppliers also feel unable to speak out about the issue for fear of losing their supermarket contracts.
The answer is a strong code of conduct, with serious consequences for those who break it, and there has at least been some improvement. For example, the groceries code adjudicator Christine Tacon has just been given the power to fine supermarkets up to one per cent of their annual turnover for a breach of the Grocery Supply Code of Practice.
This is a potentially powerful sanction, but the supermarkets will only change their behaviour if there is a real chance of it being imposed and genuine protection for suppliers who approach the adjudicator to complain. Large companies using their economic might to impose unreasonable terms on their suppliers causes real problems for small businesses, but the Goliaths will only change if David has some genuine power as part of a robust and effective code of conduct.
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