Small UK food suppliers and farmers are coming under increasing pressure from Britain’s supermarket price war, with their profit margins cut by more than a third while those at bigger competitors have widened, according to research.
Commercial lawyers EMW said small suppliers with an annual turnover below £25m lacked the negotiating power of big rivals and as a result, their profit margins fell last year from 3.5% to 2.1%. By contrast, at the biggest food companies, whose turnover tops £1bn, margins increased from 5.2% to 5.4%last year.
Related: Supermarket price war takes toll on UK food suppliers
Many farmers and other food suppliers are battling for survival. A study earlier this year found that the number of those strugging to stay afloat had leapt by more than 50%, with more than 1,600 growers and suppliers in “significant” financial distress in the three months to the end of June, according to the insolvency specialists Begbies Traynor.
Sebastian Calnan, a consultant at EMW, said: “Smaller suppliers are one of the main casualties of the supermarket price war. These SMEs [small to medium enterprises] tend to have a smaller number of contracts, so find themselves in an impossible position when they come to the negotiating table.
“Larger suppliers often feel more confident about pushing back against the supermarkets because they have a stronger market position and greater demand for their products. SMEs are often too afraid of losing what may be their biggest contract, so there is often significant pressure from the supermarkets on smaller suppliers to accept contracts with unfavourable terms.”
Britain’s big four supermarkets – Tesco, Asda, Sainsbury’s and Morrisons – have slashed prices on thousands of products in a battle for customers with the discount chains Aldi and Lidl, whose combined market share passed 10% in the latest snapshot of grocery sales.
Related: Aldi and Lidl continue to march ahead of big four rivals
Many supermarkets and large retailers are reliant on “commercial income” – revenue received from suppliers to stock certain products – to boost profits. Often this means that a supplier pays rebates to the retailer based on the quantity of a product that has been sold.
Calnan said: “Many suppliers do not feel they are in a position to resist the supermarkets’ demands for rebates. Currently, the relationship between supermarkets and their smaller suppliers is not as equitable as it should be. In many cases, there is the perverse situation where the more popular a product is with customers, the more money the supplier has to return to the supermarket.”
The latest figures from Britain’s grocery industry watchdog, the Groceries Code Adjudicator, suggest there has been a fall in the number of suppliers reporting issues with supermarkets, but this does not appear to have improved the fortunes of the smaller end of the sector.
About Unknown
0 nhận xét:
Đăng nhận xét