Tesco is asking suppliers to pay a premium to guarantee the best shelf positions for their products - even if the product isn’t on promotion.
In a recent email seen by The Grocer, Tesco’s cooking ingredients buying manager James Marshall said he would “like to request you pay a rate card for shelf positioning (applies to existing and new products).”
The rate card, which was included on the email, set out charges of £30 per product per store for lines to be stocked on the two key eye-level shelves and £15 for the top shelves and two mid-fixture shelves. The bottom shelf had no payment.
Tesco’s scale: for whose good?
Tension appears to be rising again between Tesco and its suppliers.
This new tactic follows a trading dispute that kicked off with Princes this autumn, in which more than 70 lines, including Princes meat pies, Crosse & Blackwell soups and Napolina oils, were delisted (The Grocer, 12 October).
UK MD Chris Bush and commercial director John Scouler promised a new era in supplier relations when they unveiled a new trading charter at an IGD supplier briefing, in which Tesco promised to prioritise innovation, joint working and winning together.
The charter was also part of a wider repositioning of Tesco in which it promised to use its scale for good.
The request, explained Marshall, would apply to “products that are staying in the range for week 49 as well as any new products”. It is understood that week 49 will be around the end of January ahead of the end of Tesco’s financial year in February. The email also explained that the cost for a supplier for one product in one of the eye-level shelves in 600 stores would be £18,000.
As if to drive home the importance of being on the hottest shelf, the email included a diagram of a fixture, with eye-level shelves coloured red and featuring pictures of a sun wearing sunglasses, while the base shelf was blue and featured images of igloos.
A Tesco spokeswoman said its tactics were not new and were common practice amongst the major retailers.
However, one supplier, who received the email described it as a “new tactic”. “Tesco are making it increasingly unattractive to do business with them. We won’t support this. And as a leading brand, if we are then positioned on the bottom shelf, how is that serving the needs of the Tesco customer?”
Sentinel Management Consultants CEO David Sables - who works with leading food and drink suppliers on improving negotiation skills - said such tactics were in danger of breaching the current Grocery Supply Code of Practice.
Article 12 of the code states: “A retailer must not directly or indirectly require a supplier to make any payment to secure better positioning or an increase in the allocation of shelf space for any grocery products of that supplier within a store unless such payment is made in relation to a promotion.”
Sables argued that because Tesco was asking for a payment rather than requiring it - GSCOP was not breached. However, suppliers would feel pressure to comply. “I know from the suppliers that we work with that they will fear punishment of some kind if they don’t go along with it,” he said.
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