Tesco has called on brewers to foot the bill for the cost of all duty hikes for beers on promotion in the 16 weeks following the government's 22 June emergency budget.
On 21 May suppliers received an email seen by The Grocer requesting they freeze the price Tesco pays for promotional lines, at pre-budget levels, until 10 October.
With the World Cup kicking off next week, industry insiders have predicted that about three-quarters of beer will be on promotion over the period after the budget and calculated that the cost to brewers would be £8.8m.
According to the British Beer and Pub Association, a 5% increase in duty would cost the off-trade £70m a year. Tesco is thought to have a third of the off-trade market, resulting in a duty hit of £23.3m over the next year unless the costs are passed on.
With industry sources predicting that 50% of all beer sales could be made between 22 June and the 10 October stop date and with three-quarters of the total expected to be sold on promotion brewers could face a crippling tax burden if they agree to Tesco's request, despite working on an estimated average margin of 1%, according to the BBPA.
If other supermarkets follow Tesco's lead, on the same terms, it could potentially mean a £26m cost to suppliers.
And Nisa-Today's and The Co-operative Group have also requested that beer suppliers stump up for the possible tax increase, although only for six weeks on promotional lines from the emergency budget.
However, one supplier said he was unwilling to agree to the terms.
"People don't want to take Tesco on and it's a complete abuse of power. It's scandalous," he said. "They believe no-one can refuse them because of their market share.
"It's a bit cheeky and we can live with the six weeks of duty. But if word gets out, all the supermarkets will be at it. The concern is, if you don't agree you will find your distribution is cut at the next range review."
A senior executive at one global brewer that has received the request from Tesco said agreeing to its request would cost the company a fortune.
"It would be unsustainable for anybody to hold duty to October," he said.
A spokeswoman for Tesco said: "We are working closely with suppliers to plan for the budget and promotions over the summer period.
"As promotions are planned months in advance, we have asked our suppliers to support us by not increasing their current promotional prices if there is a new duty increase announced on 22 June."
On 21 May suppliers received an email seen by The Grocer requesting they freeze the price Tesco pays for promotional lines, at pre-budget levels, until 10 October.
With the World Cup kicking off next week, industry insiders have predicted that about three-quarters of beer will be on promotion over the period after the budget and calculated that the cost to brewers would be £8.8m.
According to the British Beer and Pub Association, a 5% increase in duty would cost the off-trade £70m a year. Tesco is thought to have a third of the off-trade market, resulting in a duty hit of £23.3m over the next year unless the costs are passed on.
With industry sources predicting that 50% of all beer sales could be made between 22 June and the 10 October stop date and with three-quarters of the total expected to be sold on promotion brewers could face a crippling tax burden if they agree to Tesco's request, despite working on an estimated average margin of 1%, according to the BBPA.
If other supermarkets follow Tesco's lead, on the same terms, it could potentially mean a £26m cost to suppliers.
And Nisa-Today's and The Co-operative Group have also requested that beer suppliers stump up for the possible tax increase, although only for six weeks on promotional lines from the emergency budget.
However, one supplier said he was unwilling to agree to the terms.
"People don't want to take Tesco on and it's a complete abuse of power. It's scandalous," he said. "They believe no-one can refuse them because of their market share.
"It's a bit cheeky and we can live with the six weeks of duty. But if word gets out, all the supermarkets will be at it. The concern is, if you don't agree you will find your distribution is cut at the next range review."
A senior executive at one global brewer that has received the request from Tesco said agreeing to its request would cost the company a fortune.
"It would be unsustainable for anybody to hold duty to October," he said.
A spokeswoman for Tesco said: "We are working closely with suppliers to plan for the budget and promotions over the summer period.
"As promotions are planned months in advance, we have asked our suppliers to support us by not increasing their current promotional prices if there is a new duty increase announced on 22 June."
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