Economic fears force UK supermarkets to create back-up supplier plans

Posted by Daniel Palmer on 16th December 2008

Concerns about the future of some food suppliers in the UK has caused Britain’s leading retailers to create emergency plans in case suppliers collapse, according to The Observer.

The impact of losing suppliers can be extensive, with a loss of one major supplier creating a major headache for supermarkets. “The worst thing for a supermarket is for a supplier to go under, because you are left with a big hole and investing in a new one is a big deal,” a Tesco spokesman said, according to The Observer. Tesco, the UK’s largest supermarket operator, is reportedly informing suppliers earlier about future orders to assist with planning. The retailer has, however, been criticised this year for changing supplier contracts and requesting price cuts and back payments.

Asda, a subsidiary of Wal-Mart and the second largest supermarket operator in the UK by market share, has been monitoring the situations of their suppliers and looking into alternatives to replace any that collapse during the coming year.

And although the relationship between suppliers and supermarkets can be frosty, the immediate future of both can be put in jeopardy if relationships are not transparent. “Suppliers are under a lot of pressure and there will be casualties,” a senior executive at an unnamed chain told The Observer. “We need each other, it is not a zero-sum game.” The chain has already decided on paying some suppliers ahead of schedule to help keep them solvent.