Managing Retailer Relationships in a Deflationary Environment
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 | Managing Retailer Relationships in a Deflationary EnvironmentThis report evaluates UK and international supplier strategies in a deflationary price selling environment. It is based on a confidential interviewing programme at director level with major UK suppliers to the grocery industry. Their views on the future of the industry have been cross referenced with City and European Retail Analysts. |
What are they key commercial challenges facing suppliers in their dealings with the four major UK grocery retailers? How are suppliers meeting commercial challenges to ensure profitable growth?
The report focuses on UK based (though not necessarily UK owned) manufacturers supplying Tesco, Asda, Sainsbury’s and Morrisons. It includes branded and own label suppliers of food, beverage and household products but not those supplying general merchandise (non-food). Consultant Interviews have been made with smaller suppliers as well as large multinationals and UK consolidated groups.
In section 1, we look at the major challenge for UK food and drink suppliers – their relationship with the major retailers. Are the relationships as collaborative as retailers claim or are suppliers simply too fearful of losing their business to complain? Has the OFT supermarkets code of practice improved the situation?
In section 2, we consider the deflationary environment in which this retailer-supplier relationship exists. How tough is the price pressure on suppliers and what is the reason? Is the takeover of Safeway by Morrisons improving supplier relationships or simply contributing to further price pressures? And what about the impact of the rapid expansion of general merchandise in supermarkets?
In sections 3 to 7, we consider in detail the key issues facing suppliers in managing their retailer relationships today. Price negotiations are obviously central to this relationship but how important and how easy is it to widen the discussion to other areas like service levels, category development and quality? Do online auctions work and will they become more widespread? Is life tougher for own label suppliers than branded manufacturers?
The report looks at how category management works in practice and how smaller manufacturers can also have a say. We examine whether suppliers are making the most of the opportunities offered in new formats. How collaboratively do suppliers and retailers work on promotional strategy and is execution improving? And what about the new in-store marketing initiatives – are they seen as an opportunity for suppliers and retailers to work together or are they simply another revenue stream? In supply chain, we examine whether forecasting is improving and the outlook for factory gate pricing. How collaboratively are retailers and suppliers really working to improve overall supply chain efficiency?
In section 8, we pull together the findings to assess the strengths, weaknesses, opportunities and threats for different types of manufacturer and use this to look forward and predict the future for UK food manufacturing.
Published: April 2004
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