Get ready for a ‘scary ride’ to retailer shelves

By Rick Pendrous contact

- Last updated on GMT

Rick Pendrous, editor, Food Manufacture
Rick Pendrous, editor, Food Manufacture

Related tags: Hard discounters aldi, Morrisons, Tesco

Morrisons’ appalling results and the associated announcement last month by the retailer’s boss Dalton Philips that he planned to sell off a large slice of its estate to raise funds towards the £1bn earmarked for price cuts sent shivers throughout the whole food supply chain.

Fear was palpable within the City as well, with share prices tumbling for Tesco and Sainsbury as well as Morrisons, following the news. The concern was also manifest in lurid headlines about potential price wars. And suppliers inevitably began to worry about how all this would impact on them.

After all, with Tesco, Morrisons, Asda and Sainsbury all at each other’s throats to compete on price to the consumer as they strive to stem the inexorable rise of hard discounters Aldi and Lidl – who ultimately will be picking up the bill? You’ve got it: their suppliers.

But, as I’ve reported before, the hard discounters are cheaper to service than many other high street grocers because their demands on supplier staff time and resources are far less. The result is that suppliers can afford to offer the discounters keener prices and still turn a healthy profit. The same is unlikely to be true for the mutiples.

‘The future looks a scary ride’

As one leading food industry figure told Food Manufacture​ magazine: “The future looks like a scary ride.”​ The source noted that low inflation and deflation would hit retail performance as sales stall, while share losses would increase competition between them.

In this new retail world, manufacturers would not be immune and productivity and cost savings will re-emerge as key business performance drivers.

So, the best advice is probably to start preparing now for what’s on the horizon rather than it coming as an unpleasant surprise.

Related topics: People & Skills

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