Supermarket squeeze is still tight, claim food suppliers

Recent national press reports have stated that major supermarkets, such as Asda, have been drawing up plans to deal with the many suppliers they expected to go bust this year.

But Food Manufacture has been informed by reliable sources that, up until very recently, Tesco had been seeking price reductions equivalent to as much as 5% of some of its own-label suppliers' input costs. Such demands will only exacerbate the problems and put more suppliers at risk of going bust.

These demands - on ready meal suppliers in particular, already under pressure because of overcapacity in the sector - seem at odds with reported claims that Tesco would be supporting suppliers that needed its help by providing some indication of future orders.

"Tesco are very demanding," said one chilled food supplier that was asked to cut its prices. "We will end up very wounded indeed." The source told Food Manufacture that he found Tesco's approach rather surprising given that it had originally expressed the desire for a long-term relationship and partnership.

Business leaders across the manufacturing sector are generally pessimistic about the prospects for the year ahead. Research just published by the Chartered Management Institute (CMI) showed that business leaders believed recent attempts to 'kick start' the economy were destined to stall.

According to the CMI's Future forecast survey, eight out of 10 in the manufacturing sector believed consumer spending would plummet and 51% also thought that increased personal debt, caused by rising energy prices, would hit businesses hard. Restrictions on the availability of credit, the cost of redundancies and the lack of skilled staff, were also expected to hit business confidence.

Against this gloomy backdrop there is even more reason for improving operational efficiency within food and drink production plants. (See feature p29.)