Supermarkets are benefiting from a “rotten” supply chain system which only helps their shareholders, according to the man running Kent’s top food and drink association.
Produced in Kent manager Ed Martin said many small producers’ experiences of supermarkets mean they now “don’t want to touch them with a barge pole”.
His comments come as Tesco faces an official investigation by the Groceries Code Adjudicator into practices including delays in payments to suppliers.
Tesco in Whitstable
Tesco has also come under fire after the Sunday Times revealed it had seen emails sent to suppliers in which the supermarket demanded price cuts because the falling cost of raw materials.
If they did not comply, Tesco said it would have to consider its support for their product.
Produced in Kent manager Ed Martin said: “On balance small producers say they don’t want to touch them with a barge pole.
“There are many stories about people having their fingers burned and worse. A lot of retailers have done themselves no favours because of questionable practices for decades.
“They have never seriously been challenged because of their dominance in the market place. Now they are and it’s about time.
Produced in Kent manager Ed Martin
“We have a rotten supply chain system across the UK which is to no-one’s advantage except the shareholders and directors of the supermarkets.”
The Groceries Code Adjudicator Christine Tacon announced the Tesco investigation saying she had formed a “reasonable suspicion” that the retailer had breached the Groceries Supply Code of Practice.
Ms Tacon said she had held discussions with the company and now needed more information from direct suppliers and others to determine action.
A series of scandals have hit Tesco, including an overstatement of profits by £263 million and the revelation it is closing 43 stores nationally, including its supermarket in Chatham.
Tesco’s store in Chatham will close on April 4
Last month, it also pulled out of 49 future developments, including Lowfield Street in Dartford and Cuxton Road in Strood, as it continues to have its market share squeezed by discounters like Aldi and Lidl.
Shaun Kelly, business development consultant at asb law, based in Maidstone, said: “As competition has increased the main players have pushed harder for margin and this has meant pressure on suppliers.
“This has moved to payments being sought for marketing contributions, shelf space and the like.
“As competition has increased the main players have pushed harder for margin and this has meant pressure on suppliers…” – asb law’s Shaun Kelly
“Suppliers must ensure their contract is appropriate, build a relationship with the buyer and be prepared to ‘go legal’ as a last resort.
“Supermarkets can be good long-term clients – not always – but if small and medium-sized businesses mitigate risk sensibly then there’s sustainable profit and cash-flow to be had.”
The National Farmers’ Union said supermarket wars meant farmers needed to prepare for more of the pressure on price.
NFU South East spokeswoman Isobel Bretherton said: “The NFU wants a fair and transparent marketplace – farmers and growers should not bear all the risks and we do not want to see the farmgate, where there is least margin, being squeezed still further.
“But competition in the retail sector is fierce, particularly since the advent of the discounters, and inevitably this means that downward pressure on prices travels all the way down the supply chain, with the primary producer bearing the brunt.
“We need to ensure more farmers are protected from unfair trading practices, which strip value out of the supply chain, affecting both producers and consumers.”
Farmers have to prepare for more pressure on price from supermarkets according to the NFU
Supermarkets are faced with a difficult balancing act between the demands of consumers and their growers, according to the boss of a company which promotes English apples and pears.
Adrian Barlow said relations between farmers and the multiple retailers had improved over the last decade.
His firm, English Apples and Pears, based in East Malling Research Centre, represents more than 200 growers, two thirds of them in the South East.
The chief executive said: “Supermarkets are there to make money and they only make money if they give consumers what they want.
“They have to balance on one hand the fact consumers would ideally buy their food for nothing with making sure they give growers a return to enable them to continue production.
English Apples and Pears chief executive Adrian Barlow
“They have to make sure they provide value for money and that returns to growers are sufficient.”
He said a shift in consumer values – favouring locally produced food over imports with a heavy carbon footprint – had forced supermarkets to protect growers in Kent.
He pointed to the higher prices the retailers are prepared to pay for English fruit, even though prices have been depressed in Europe by trade sanctions on Russia.
Mr Barlow said: “They have been paying a considerable premium for English produce because they recognise the importance of keeping growers in business.
“Over the last 10 years the multiples have worked closely with the industry. Sainsbury’s and Waitrose have done a fantastic job and we have seen good support from Tesco.”
He added: “Growers need assurance that they will try to pay whatever that cost is, otherwise they won’t take the risk.
“The multiple retailers have been very supportive as a whole. Our sales volumes to them are 25% higher than last year and that was not a particularly low year.”
Tesco in Ashford
A Tesco spokesman said: “We have worked closely with the office of the adjudicator since its creation to put in place strong compliance processes.
“Following our announcement last September regarding commercial income, we have worked with her to identify any relevant Groceries Supply Code of Practice issues.
“An internal review we carried out and shared with the Groceries Code Adjudicator identified some areas of concern.
“We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with suppliers.
“We will continue to cooperate fully with the GCA as she carries out her investigation and welcome the opportunity for our suppliers to provide direct feedback.”
The Groceries Code Adjudicator’s investigation, the first to be held, is expected to take up to nine months, with evidence from suppliers needing to be submitted by the beginning of April.