Food suppliers are getting a hard time from the grocers over pressure to bring their prices down. While it is essential that prices remain low for shoppers in the downturn, suppliers are doing their bit.
Food suppliers have been given a bashing from supermarkets over recent weeks. As grocers strive to bring prices down they are pushing for suppliers to also bring their prices down. And, on the whole, grocers argue that suppliers aren’t playing ball.
Speaking at the Retail Week Conference this week, Unilever UK & Ireland chairman Dave Lewis held his hands up and agreed that suppliers need to do their bit. He said that suppliers should get their house in order, to facilitate bringing down prices.
But rather than just saying that suppliers should do this, Lewis outlined what Unilever has already been doing.
18 months ago Unilever was made up of four separate businesses, which have now been amalgamated into one. This move has taken 40 per cent of costs out of the business. The strategy has set the business in good stead and mirrors what is happening in the retail industry where consolidation seems to be a top priority.
Lewis also tackled the much-talked about subject of commodity prices. The grocers have talked about how commodity prices are coming down and suppliers need to adjust their prices accordingly, and yet Lewis pointed out that this is only the case in certain areas.
He said that while the prices of some commodities have come down, the price of others are still escalating. Unilever, he pointed out, is the largest buyer of tomatoes – the price of which has doubled in the past year.
The exchange rate hasn’t helped either. About six months ago,£1 was equal to around $2 and now that rate is about 30 per cent less. The grocers are struggling with the exchange rate, but so are suppliers. Most commodities no longer trade in sterling, meaning any fluctuation in the rate of the pound has a massive impact on business.
Unilever was bullish about the power of its brands in certain sectors. Washing powder for instance, Lewis says he sees very little competition from own labels.
But in other sectors, Unilever is having to fight to maintain its market share. It is working with the grocers on price promotions and constantly reviewing products to make sure its customer loyalty is maintained.
It is essential that grocers push prices down for shoppers, but it should be recognised that suppliers are battling the same global problems.
With healthy debate, grocers and suppliers can work on better deals for customers – and the fact still remains that both parties can work the details out among themselves, without the need for Government intervention.