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TescoGate will see end to "dodgy practices" and a reformed grocery sector, predict analysts

Published:  17 October, 2014

The grocery retail sector will never be the same again in the wake of the TescoGate accounting scandal now the lid has been lifted over supermarket and supplier relations.

Retail experts, analysts and consultants, however, are split over what long term impact the fall-out from the Tesco accounting investigation will have on the overall grocery sector.

In a separate wide ranging analysis, looks at the ramifications for both grocery retailers and suppliers in the wake of the Tesco scandal that has seen eight high profile executives, including Dan Jago, head of beers, wines and spirts, suspended and sent home.

Angela Mount, former head of wine at Somerfield, who has already revealed on the kind of pressures buyers are forced to put on their suppliers in times of financial difficulty, believes the Tesco scandal will result in a "seismic change in supplier/retailer relations".

She explained: "This has finally taken the lid off a situation that many suppliers have complained about for years, but haven't dared mention. Now they have more strength and conviction to speak out."

She also believed "the scale of this investigation means there will be a call from retailers for a review of the Code of Practice."

Mount added: "Because there is such intense scrutiny, I can't see how the investigation won't escalate into an industry-wide one."

But some retail analysts and consultants fear there will be "no change whatsoever" between retailer and supplier relations unless the government is prepared to step in.

David Sables, chief executive of Sentinel Management Consultants, which advises suppliers, including some in the BWS sector, believed that once the Tesco investigation has ended, all retailers will have to admit their actions and stop pulling forward payments. They will, he added, have to take a drop in value in one period as a result.

But overall, he believes, there will be "no change whatsoever" in trading arrangements between suppliers and retailers.

"The government won't have the stomach to legislate on any of it, as they'll say that in the end the consumer gets a win. But I disagree, I think the consumer loses. The big retailers claim they are the guardians of low prices, but the truth is they are the guardians of their own profits. The following year everything will be business as normal."

Andrew Marsden, a veteran of the supply trade who has held senior marketing roles in Britvic and Danone and now works as a retail and marketing consultant, believed other retailers are also guilty of the kind of profit adjustments that are alleged to have taken place at Tesco.

"I can't imagine this kind of adjustment to profit is not much more widespread. It confounds common sense it was not happening at other big retailers."

He said suppliers would "inevitably be drawn in" to the investigation, and would face questions about why they didn't complain about non-compliance and why they paid fees upfront.

He hoped the spotlight being shone on Tesco's financial affairs will "stop dodgy practices" and improve relations with suppliers.

Read special TescoGate analysis which looks at why the drinks industry and wine suppliers in particular are being dragged in to the investigation.

It also looks at the increasingly "creative" accounting demands supermarkets are placing on their suppliers and what has got Tesco in to such hot water.