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Supermarkets' power threatens suppliers

Published:  23 July, 2008

UK: High profile drink companies contribute to survey highlighting supermarket supplier management tactics.

Almost 60% of suppliers have no notice period in respect of their supply agreements, meaning that supermarkets have few, if any, obligations if they were to de-list them.

41% of respondents claim to have a notice period in place; however, for half of these it's purely on a verbal basis. Those with a notice period claim it is 14 weeks.

Over the past three years, almost 80% of suppliers have been subjected to supermarket pressure to drop their prices. Suppliers stated that their products are now sold on average 8% compared to three years ago.

Between 0 and 25% (average of 4%) of suppliers' gross sales value is contributed back to supermarkets in the form of volume over-riders, discounts, promotional and marketing contributions and any other payments, the survey said.

Almost a third (28%) are seeing the request for supplier contributions increase - for 64% it's staying the same.

"Solutions to the major financial distress caused by the market power wielded by the major multiples on the supply chain have yet to emerge," Swift said.