Coke leaves Tesco at factory gate

Coca-Cola and Tesco ‘mutually agreed’ to axe a factory gate pricing trial last Christmas, blaming ‘availability issues’, the soft drinks giant has revealed.

Stephen Moorhouse, vice president of operations at Coca Cola Enterprises, said: “We did a factory gate pricing trial with Tesco that lasted for about 15 months, where we effectively treated Tesco as a haulage provider. At one point up to 50% of Tesco’s volume was supplied on a factory gate pricing basis. However, there were availability issues and it was actually Tesco’s commercial team that said, ‘we don’t think this is working’. So it was mutually agreed to stop.”

He added: “We work very closely with the leading UK food retailers and we are always open to suggestions about how to optimise the supply chain.”

More than two thirds of goods bound for Tesco’s distribution centres now arrive on Tesco’s own lorries, or on trucks run by hauliers contracted to Tesco. Manufacturers in turn sell goods to Tesco at a ‘factory gate’ price (a price without distribution costs built in).

However, Tesco’s commercial director Richard Brasher has, in the past, admitted that Tesco’s failure rate on making factory gate collections from suppliers was “unacceptable”

Speaking at the IGD Retail Logistics conference late last year, he told suppliers that it was “an absolute priority” to tackle the problem: “The primary distribution network [between suppliers and Tesco distribution centres] isn’t optimised yet. I’m basically not in a position to say that Tesco is offering the most competitive rate and always turning up on time. But I want suppliers to work with us out of willingness, not in a state of coercion.”

He added: “It needs to be seen not as a problem, but as an opportunity and I want to have honest and open discussions with suppliers to help improve the situation.”