Morrisons puts suppliers under strain
Various sources have told FoodManufacture.co.uk that the supermarket chain was seeking to source greater volumes from fewer suppliers at three supplier briefings, which were held at its offices in Bradford on June 18. Morrisons told its suppliers it expected them to cut their prices through increased efficiencies.
The move was said to have severely strained relationships between Morrisons and its suppliers, which traditionally had been very good.
"A couple of hundred bigger suppliers" had been called in for a regular "supplier update day" at the supermarket's headquarters in Bradford, according to a Morrisons spokesman. Although he refused to reveal precise details of the negotiations, the spokesman added: "It's not the case that our suppliers were told that we want better terms. It's very strategic. We are seeking economies through increasing volumes across the majority of categories. It's about driving volume and getting efficiencies."
However, suppliers that spoke to FoodManufacture.co.uk had a completely different take on events. Some described Morrisons' attempts to achieve half a million pounds from each of them as "ridiculous". While the retailer is unlikely to achieve the level of cuts it is demanding, it would probably get something, said suppliers.
"It is an unusual level of aggression from a business that has usually been honourable," said one supplier, who wished to remain anonymous. "They demanded very heavy discounts on top of what already may have been agreed. I am sure others will be suffering similar pain to ourselves. You're talking half a million pound slugs. I don't think that's tenable but if they ask for 10 they get five."
"The message was: 'double your investment or get lost'," said another unnamed supplier.
However, Morrisons is known to be encountering practical problems related to complex ingredients supply chains as its buyers meet suppliers to discuss individual accounts. This is likely to delay its supplier plans.
"One difficulty is how you agree a spec and an ingredient list for a particular own-label product," said a supplier. "The complexity of the tendering process is perhaps delaying bringing this to fruition. The quality of ingredients can also vary, and Morrisons could end up with some very inferior products."
The spokesman for Morrisons said that progress on the negotiations with suppliers had "not moved on" significantly since FoodManufacture.co.uk revealed its savings plan at the beginning of last month. He said: "There is no definitive date when it will finish."
Following the briefings in June, Morrisons' buyers were now meeting individual suppliers in turn to hammer out new deals and drive "volume growth", he added.
