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Tesco demands supplier price cuts by July 10 - source


Social distancing outside a Tesco supermarket in north London (Victoria Jones/PA)

Social distancing outside a Tesco supermarket in north London (Victoria Jones/PA)

Social distancing outside a Tesco supermarket in north London (Victoria Jones/PA)

Tesco, Britain’s biggest supermarket group, has given suppliers until July 10 to agree price reductions as it prepares to step-up its price battle with discounters Aldi and Lidl, an industry source told Reuters.

The source said the move by Tesco forms part of its shift to a so-called everyday low pricing (EDLP) strategy, which will see it use fewer promotions.

The July 10 deadline was first reported by industry publication The Grocer, which said a raft of suppliers had told it they faced huge pressure from Tesco to lower their prices, and had raised concerns over the timescale of the demands.

A Tesco spokesman declined to comment on the July 10 date, but said the group had been speaking to suppliers about its strategy going forward.

“Through the COVID-19 crisis we have worked collaboratively with suppliers – shortening payment terms for our small suppliers, widening specifications and taking produce previously destined for the foodservice industry – so that we can support their businesses and help our customers get the food they need,” he said.

“That collaborative approach will continue as we look for new and innovative ways to bring our customers great quality products at great value prices.”

Tesco CEO Dave Lewis joined the firm in 2014 shortly before a supplier-related accounting scandal plunged the group into the worst crisis in its history.

He is stepping down on Oct. 1 after a tenure that has transformed the group’s fortunes, handing over to Ken Murphy.

Tesco said its most recent Supplier Viewpoint Survey found overall supplier satisfaction reached its highest score to date of 80%, versus 55% in 2014.

Last week, when Tesco reported strong first quarter sales and expanded its Aldi Price Match scheme to 500 branded and own label products, Lewis talked about his approach to suppliers.

“I’ve been having this conversation with suppliers for six years – I don’t see why anybody should pay more for a brand in Tesco than anywhere else,” he told reporters.

“It’s better for us to focus on large volume lines that customers really want and invest our money together in the price of that rather than deploying it across a range of promotions which are disruptive in the supply chain and ultimately don’t give customers the best value,” he said.

ICSA president Edmond Phelan has described the move by Tesco UK to demand suppliers drop their prices as disgraceful. “Tesco UK is one of our biggest customers for beef, but once again the power wielded by major retail corporations has been exposed for all to see. Expecting suppliers to cut their prices while they disregard production costs is unconscionable,” he said.

“The move is particularly galling as it comes on the back of bumper grocery sales over recent months.”

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