Tesco denies squeezing its suppliers after analyst’s criticism

By Michael Stones

- Last updated on GMT

Tesco denied treating its suppliers unfairly
Tesco denied treating its suppliers unfairly

Related tags Retailing Supermarket Tesco

Tesco has denied putting its suppliers under unfair pressure, after retail analyst Cantor Fitzgerald accused the retail giant of practices that risked breaching the Groceries Supply Code of Practice.

Mike Dennis, an analyst with Cantor Fitzgerald, said: “It is our view that Tesco has overstepped the mark and situation is very difficult for many suppliers.”

Dennis added: “It seems Tesco’s stable UK margin stance is illogical and unsustainable and cannot be justified at the expense of sales, European profits and other operations.”

But Tesco dismissed the claims as “speculation”.

‘Based only on speculation’

A Tesco spokesman said: “The analyst is clear it is his opinion, based only on speculation, but he doesn’t seem to have taken our previous guidance into account.

“In our interim results presentation last month ​[October], we set out how the general merchandise transformation programme will be a drag on our sales growth but beneficial to the overall UK margin, helping to offset some of the other investments we are making for customers.”

Tesco has been widely tipped to be on the brink of releasing another set of disappointing quarterly results this week. Some analysts have even predicted it will announce like-for-like sales down by as much as 1.5%, leading to questions about its turnaround strategy.

Cantor Fitzgerald claimed the retailer had contacted hundreds of its suppliers to require discounts on contracts that are usually paid 60 days in arrears.

Groceries Code Adjudicator

Dennis claimed Tesco was squeezing retailers now in order to avoid the attentions of the Groceries Code Adjudicator Christine Tacon at a later date.

Tacon’s office said it had received no complaints about Tesco demanding cash from its suppliers. “Where we do hear reports about possible issues surrounding the code, we will look to follow up with the retailer concerned,”​ a spokesman told The Guardian​ newspaper.

Tesco sales are widely seen as being vulnerable to the polarisation of the UK grocery market. Britain’s leading supermarket is increasingly losing sales to both posh retailers, such as Waitrose, and discount outlets, such as Lidl and Aldi.

The retailer’s next quarterly update is expected on Wednesday December 4.

Meanwhile, Hilton Food Group today (December 2) announced a multi-million pound, six-year partnership​ with Tesco to supply packed fresh meat products into the UK. City analyst Panmure Gordon predicted the deal would lead to £20M of new investment at its Huntingdon site and boost sales by 40% in the first full year 2015.

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Unlawful deductions

Posted by Abraham,

It is not just a case of squeezing suppliers. There are a handful of unlawful deductions towards the end of the month - especially during the monthly closing period.

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Tesco squeeze

Posted by Ian,

Yes they squeeze as much as they can by using bully boy tactics.

We have been supplying them for a few years and now have most of our eggs in one basket (theirs). This is the worst thing the company I work for has done.

Once they have got you, look out!

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Tesco squeeze

Posted by Dennis Hoare,

Tesco has always squeezed their suppliers - especially farmers and any small suppliers.

If it has a promotion, it discounts the supplier to the same amount.

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