Britain's Tesco demands supplier price cuts by July 10: source

[LONDON] Tesco, Britain's biggest supermarket group, has given suppliers until July 10 to agree price reductions as it prepares to step-up its price battle with discounters Aldi and Lidl, an industry source told Reuters.

The source said the move by Tesco forms part of its shift to a so-called everyday low pricing (EDLP) strategy, which will see it use fewer promotions.

The July 10 deadline was first reported by industry publication The Grocer, which said a raft of suppliers had told it they faced huge pressure from Tesco to lower their prices, and had raised concerns over the timescale of the demands.

A Tesco spokesperson declined to comment on the July 10 date, but said the group had been speaking to suppliers about its strategy going forward.

"Through the Covid-19 crisis we have worked collaboratively with suppliers - shortening payment terms for our small suppliers, widening specifications and taking produce previously destined for the food service industry - so that we can support their businesses and help our customers get the food they need," he said.

"That collaborative approach will continue as we look for new and innovative ways to bring our customers great quality products at great value prices."

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Tesco chief executive officer Dave Lewis joined the firm in 2014 shortly before a supplier-related accounting scandal plunged the group into the worst crisis in its history.

He is stepping down on Oct 1 after a tenure that has transformed the group's fortunes, handing over to Ken Murphy.

Tesco said its most recent Supplier Viewpoint Survey found overall supplier satisfaction reached its highest score to date of 80 per cent, versus 55 per cent in 2014.

Last week, when Tesco reported strong first quarter sales and expanded its Aldi Price Match scheme to 500 branded and own label products, Mr Lewis talked about his approach to suppliers.

"I've been having this conversation with suppliers for six years - I don't see why anybody should pay more for a brand in Tesco than anywhere else," he told reporters.

"It's better for us to focus on large volume lines that customers really want and invest our money together in the price of that rather than deploying it across a range of promotions which are disruptive in the supply chain and ultimately don't give customers the best value," he said.

REUTERS