Supermarket price wars and late payments crush small suppliers » SMEInsider

Supermarket price wars and late payments crush small suppliers

Food suppliers continue to struggle as supermarkets cut prices and delay payments, research shows, with smaller companies and high street grocers taking the biggest hit.

According to research by business recovery specialists Begbies Traynor, supermarket price wars are driving their suppliers into the ground.

New Red Flag Alert research for the first quarter of 2015, which monitors the financial health of UK companies, found that while the number of British food retailers experiencing significant financial distress has increased 66 per cent compared to the same period last year, the figure is 94 per cent for food and beverage manufacturers.

The figures are much higher for small and medium-sized food suppliers, having increased by 120 per cent over the first quarter. Some 1,267 businesses surveyed reported significant distress, compared to 574 in the first quarter of 2014.

“Mass price reductions have severe consequences for less established food retailers and suppliers, particularly SMEs, who now seem to be locked in a David and Goliath-style battle, although this time it appears David can’t win,” said Judie Palmer, partner and retail expert at Begbies Traynor.

Small UK food suppliers are likely to struggle even more as discount stores Aldi and Lidl, whose stock mostly from overseas, are expected to take 20 per cent of UK market share. Recent regulations to support smaller businesses and suppliers have yet to make any significant difference, Supplymanagement reported.

“The introduction of the Prompt Payment Code and the powers given to the groceries code adjudicator to fine supermarkets in breach of the Grocery Supply Code of Practice have only had a minimal impact, and these latest Red Flag figures indicate that they may simply be too little too late for many in the SME supply chain,” Palmer added.