Tesco Admits To ‘Tension’ With Suppliers

After it was revealed last week that Tesco had slipped down GSCOP compliance ranking, the retailer’s Chief Executive has blamed its fall on “fighting the fight” for consumers against inflation.

After posting robust first-quarter results on Friday, Ken Murphy is quoted by trade publication The Grocer as saying there was an “inevitable tension” with suppliers trying to get through cost price increase (CPI) requests and Tesco seeking to keep prices down.

Last week’s compliance ranking published by the Groceries Code Adjudicator (GCA) showed Tesco had fallen from second place to sixth. This was despite the cut-off for the survey coming before Tesco’s call on suppliers to start paying fulfilment fees for using its online and Booker wholesale services. The report by The Grocer noted that this recent move could result in Tesco falling even further down the table next year.

Murphy highlighted that the latest GCA ranking was “very, very tight,” adding: “We are only talking about a percentage point of two in the difference, and I’m really pleased that more than 95% of suppliers recognise we are compliant with the code.

“However, there is an inevitable tension between retailers and suppliers over the passing on of costs and how we fight the fight for customers.”

Meanwhile, Murphy offered further reasoning for its upcoming range reset programme, ‘Fit for Change’. This was announced last month and is set to be the biggest range review since predecessor Dave Lewis’s ‘Project Reset’.

Murphy told The Grocer: “We have seen a giant leap in the technology to enable us to predict what customers will buy and where. This review is all about making sure we combine minimising the cost of servicing those customers with making sure we optimise the range so our customers have enough of the product they want to find.”

NamNews Implications:

• Consumers, retailers and suppliers are coping with Lockdown fallout.
• The most fundamental and unprecedented business challenges, ever…
• In principle, each member of the supply chain will try to isolate costs that can be passed to other parts of that supply chain.
• (The Tesco fulfilment charge being just one example…)
• Suppliers need to quantify the financial impact of every part of their supplier-retailer relationship…
• …and negotiate like-with-like re the impact on respective P&Ls.

#CPIs #Costs #SupplierRetailerRelationships