Tesco tells suppliers to cut prices or face axe

13 February, 2015

Suppliers have accused Tesco of making unreasonable demands after the supermarket told them to cut prices or make additional investments to keep listings.

Tensions with the supply base have intensified after Tesco drafted in management consultants to review its offer across every category. This has resulted in a decision to drop a third of its drinks range.

Tesco buyers have been discussing the cull with producers over the last few months, and many have contacted OLN claiming to have been asked to accept significant price cuts or make extra investments to keep listings.

In one case, a supplier said Tesco approached it before Christmas demanding price cuts because it had heard that the company had “enjoyed lower input costs and was paying less for raw ingredients”.

The supplier said that when it challenged Tesco, the supermarket was unable to provide evidence of the savings it was allegedly making.

Another supplier said it felt pressured during a meeting in which Tesco disclosed it would

be making significant range cuts. The producer added: “The [suggested new] cost price was

much lower than the current price and [I was given] a date when that would come into effect. In the same exchanges, Tesco also identified that there would be a reduction in the numbers of products stocked

in that category in 2015 with an obvious link identified between that range review and the price reduction it was seeking agreement to.”

A Tesco spokesperson declined to comment.

Tesco did contact suppliers in January to remind them about its Tesco Supplier Protector Line, a confidential way for whistleblowers in stores and in supplier businesses to report inappropriate practices.

But another leading supplier said: “Tesco hasn’t learnt anything. It says it wants to clean up its image, but there are always requests for things. Nobody wants to speak out because they are scared. People want the business because losing it could mean the end.”

Other suppliers suggest Tesco’s buying team has become unsettled by fears that the range cut could lead to redundancies.

Last week, industry watchdog the Groceries Code Adjudicator announced it was launching a formal investigation into the retailer’s practices after last year’s accounts scandal.

It comes five months after Tesco launched its own internal inquiry and suspended senior executives including head of BWS Dan Jago.

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