Ethics threatened by Tesco's tough trading terms

14 November, 2008

Tesco’s tough new trading terms are threatening to undermine suppliers’ ethical responsibilities, producers in South Africa have warned.

A number of companies are locked in negotiations with the chain after it demanded retrospective listing allowances and higher margins (OLN, Oct 31), which many fear will prevent them honouring financial commitments made to their workforce.

One leading supplier said: “Our socioeconomic conditions force producers to think about different objectives and we need to plough something back into the economy because we have a responsibility to create a sustainable future.

“It’s not just about treating employees decently, we also have to remunerate them properly. In order to have something flowing back, we need some sort of return in the marketplace. We are a customer-centric business and we recognise that times are tough, but Tesco’s demands are a threat to our sustainability. We want to participate, but there are limits.”

However, another South African supplier, ready to sign Tesco’s new contract, said producers must consider the volumes grocers offered. “Supermarkets provide an opportunity to take your product to the masses. But you have to accept that wine is just part of the mix and that conditions are extremely tough.”

Jo Mason, Wines of South Africa’s UK market manager, said: “South Africa faces a unique set of issues for a wine producing nation, in that social responsibility is high on the agenda. The wine industry must consider how to create a long-term, sustainable future. When cost cuts are being considered they have an effect all the way down the supply chain, to the farm workers.”

Graham Nash, Tesco product development manager, said: “We are in a position of ongoing negotiations with our supply base and as such are not able to make comments on individual cases, be it supplier or country-specific.”

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