LOW PRICES in supermarkets are having a devastating impact on more than 100 food suppliers, which could force them out of business, new report says.
The report, conducted by Begbies Traynor, which monitors the financial health of UK companies, has highlighted that the number of smaller food suppliers experiencing financial distress has more than doubled in 2014.
This is a result of UK supermarkets cutting their prices, decreasing suppliers’ margins and elongating payment terms, which allows them to offer consumers the lowest prices available and could change the structure of the UK’s food supply industry forever.
Statistics show that the UK’s SME food retailers and suppliers have been the worst casualties so far, the analysis reveals that the number of smaller food retailers in ‘Significant’ distress rose by 61% to 4,388 in Q4 2014, from 2,731 last year.
Julie Palmer, Partner at Begbies Traynor, says that the “supermarket price war is intensifying and the UK’s smallest food supplier are bearing the brunt.”
She adds: “In recent weeks, Asda and Sainsbury’s have promised £450m worth of price cuts between them, Morrisons has started a search for a new CEO who can return them to growth, while Tesco has set out major plans to reassert its dominance over the UK grocery market.
“Unless the supermarkets start treating their suppliers more fairly and find longer term solutions to their cost cutting exercise, we expect that more than 100 of these 1410 ‘Significantly’ distressed food and beverage suppliers will fall into administration before the year is up.”