Suppliers slam Tesco as trading terms change overnight

31 October, 2008

Tesco is demanding improved trading terms from drinks suppliers as part of its strategy to offer keen prices as the economy falters.

One wine supplier told OLN Tesco was demanding 5% -10% extra, depending on the terms that were already in place.

"This is not something they've done before," he said.

"Suppliers are just getting a sheet of paper with the cost price that they will be getting paid by Tesco."

He added that the move was likely to result in a reduction in the number of wine suppliers to Tesco, as many businesses would not be able to absorb extra costs in a year when currency fluctuations and duty hikes had taken their toll, and the price of oil and raw materials had added to pressures. "It will be survival of the fittest," he said.

He added: "Suppliers will look at the profits being made by Tesco when a lot of them are struggling. Changing trading terms overnight is not something they're going to be happy with. It's an area in which people would like to see the OFT legislate."

A Tesco spokesman said: "Our customers are facing tough times as a result of the current economic slowdown and they are looking to Tesco to help.

"We have already launched hundreds of new products but they also expect us to continuously negotiate the very best deals on their behalf.

"This is what we have been doing with some of our most significant suppliers this week.

"Commodity prices have started to fall, easing the pressure a little on businesses and offering the opportunity for us to work with suppliers to do even more for customers."

Steve Barton, director of First Cape supplier Brand Phoenix, was not

surprised by Tesco's action, which he said reflected the tough economic conditions.

"If you price products at levels people are unwilling to pay, you're at risk," he said. "If the trade keeps trying to convince itself that premiumisation is the way forward, when it's defini tely not, it will lose a lot of the value and volume it's been building very successfully."

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