Firms face toughest price negotiations 'in living memory'

By Rod Addy

- Last updated on GMT

Related tags: Cost

Firms face toughest price negotiations 'in living memory'
Commodity price hikes are presenting some manufacturers with their toughest negotiating environment “in living memory”, with retailers delisting or suspending products not meeting their price demands.

One industry veteran told Food Manufacture: “I’ve experienced a very hard level of negotiation; the hardest ever I have known.”

Tesco hit the headlines last year for de-listing Premier Foods Hovis products after it demanded higher prices. But other major supermarkets have also suspended or de-listed products, or threatened to do so, for similar reasons, especially in the midst of the latest price promotion battle, according to manufacturers contacting this publication.

“The supermarket war is not good; they are de-listing brands in favour of own-label,”​ said one.

Meanwhile, retailers’ efforts to claw back margins by slapping on last-minute costs were “downright shameful”, ​he added

“Costs suddenly spring out after you have submitted pricing that they say cannot be factored back in as it’s too late."

Ingredients suppliers are unlikely to be able to carry the cost increases either. “Some of our suppliers will go broke if we don’t support them,” ​said one manufacturer.

Stifling innovation

Another said the tough trading climate would stifle innovation. “If negotiations go on, it’s difficult to envisage any new product development this year.”

Others expect retailers to pass some price inflation on to consumers from the beginning of this month, having held back VAT rises on items in January.

Spiralling wheat, coffee and cocoa costs all hit the headlines recently, but sharp spikes are also expected in other areas. Sultanas have already seen steep rises, up 60% year-on-year with Turkey thought to be sitting on supplies in an effort to raise prices.

Market analyst Mintec also said continuing bad US weather could hit soya and corn crops, which would impact meat and dairy prices as soya is a key component in animal feed.

Mintec also highlighted sharp increases in crude oil prices, putting upward pressure on biofuels prices, while others cited significant rises in rapeseed oil prices, with a resultant impact on the price of cooking oils and bakery fats.

Related topics: Bakery, Meat, poultry & seafood

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