Lean processors better placed in the price war

By Nicholas Robinson contact

- Last updated on GMT

Supermarket price war has provided a boost for some manufacturers
Supermarket price war has provided a boost for some manufacturers

Related tags: Marketing, Supermarket

The supermarket price war hasn’t been as bad for food manufacturers as some think and has instead provided a boost for many firms, according to business experts.

Innovative firms that have adopted lean manufacturing practises have been winners in the war, despite the millions of pounds of price cuts announced by retailers, they added.

Morrisons has just announced plans to slash the price of 130 staples by 22%.

“We have lots of clients who have grown over the past year,”​ said Trefor Griffith, partner at financial advisory firm Grant Thornton. “In part, that’s due to their relationships with Waitrose, Aldi, Lidl and the pound stores.”

Harder for small firms

That said, larger manufacturers are better placed to deal with the price war, claimed professor Michael Bourlakis, head of logistics and supply chain management at Cranfield University. “The small firms still won’t be able to work with the changes as easily and it has been a lot harder for them.”

Although supermarkets have to stock the major ‘go-to’ brands, other branded manufacturers could face increased pressure from retailers as they continue to cut costs and reduce the number of stock keeping units (SKUs) held, both Griffith and Bourlakis agreed.

“Branded manufacturers across all price points will be impacted by SKU streamlining, with the mid-tier hardest hit,”​ Griffith added.

A continuing challenge for branded manufacturers would be how to deal with the discounters, which represent a channel that can no longer be ignored, he argued. “But it’s very difficult to devise the best strategy to deal with their price matching.”

'Race to the bottom'

Both Griffith and Bourlakis thought the “race to the bottom”​ on price would continue for some time yet. “The price wars are here to stay for the time being we’re living in a society where consumers are swayed by price,”​ Bourlakis said.

Meanwhile, manufacturers have faced less bullying from major high-street multiple supermarkets over recent months because of fears of coming under scrutiny by the Groceries Code Adjudicator (GCA) Christine Tacon, said Griffith.

“Some clients will say that supermarkets have been less aggressive of late in some circumstances due to fear of whistle-blowing and negative publicity, which is now further heightened with the arrival of the GCA's new powers,”​ he said.

Tacon was recently granted additional powers from the government to fine retailers 1% of their turnover if they were found to be in breach of the Groceries Supply Code of Practice. 

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