Tuesday 4 November 2008

Bully boy Tesco at it again! (my words)

The following is extracted from The Sunday Telegraph, November 2nd.

Tesco, Britain’s largest supermarket, is demanding vastly improved trading terms from wine and champagne suppliers in a bid to keep prices down on its shelves in the run-up to Christmas.
One drinks company said that it had been given until this weekend to accept the new terms, in what is being seen as an across-the-board campaign by Tesco to get better deals from its suppliers during the credit crisis.
One Tesco alcohol supplier said that new “take it or leave it” terms from the retailer included an immediate cut in the price that it will pay for the products, a request for a doubling of funds for promotional activity and a ban on price rises to Tesco from the supplier for next year.
Another supplier claims that Tesco is asking for between five and 10pc off the price that it pays for goods. Wine producers are concerned that the move may lead to a fall in the number of suppliers that do business with the retailer due to the increased cost involved. “It will be survival of the fittest,” one supplier said.
Last December, the value of wine, beers and spirits sold in supermarkets grew by 3.9pc. However, producers have been hit this year by higher freight costs, duty increases and currency movements, which are wiping out much of their sales growth.
Tesco has said that customers are facing tough times as a result of the economic slowdown and are “looking to us to help”.

It is estimated that Tesco accounts for 3 out of 10 bottles of wine bought through supermarkets.

Back to my thoughts on this subject.

It is this sort of tactics that will drive wine suppliers, wine makers, and smaller wine merchants out of business. Tesco is well known in the trade as being a bully boy when it comes to demanding cost prices – I wouldn’t even use the word negotiate, Tesco management doesn’t know that word. If Tesco persists in this attitude, then the only way out for winemakers/suppliers is to stop trading with Tesco, which most will be afraid to do, or reduce the quality of the wines offered, to match their subsequent lower cost prices.
Fortunately I try to avoid the mainstream brands that dominate the supermarket shelves, so it will only affect me indirectly. But you can be sure that the majority of brands/labels on my list a have been produced with quality being paramount, not an ever reducing price driving down the quality. Also, coming from the clearance market, they are being sold at similar prices to inferior supermarket brands.

No comments: