Meaningful supplier relationships with supermarkets are literally in short supply

I recently heard from a leading food supplier about a shift they’re seeing. It’s happening largely below the radar, but it made me sit up and take notice. It has the potential to transform relationships between those retailing and those supplying our food.

What is this shift? That UK food companies are increasingly having to source from scarcity, rather than sourcing from abundance.

In the past, there were more supply options for UK food businesses to choose from – but now they’re being squeezed out, through geopolitical changes, conflict, environmental crises and other factors.

Moving from sourcing from abundance to sourcing from scarcity has far-reaching implications for security of supply and cost of ingredients.

There have already been huge increases in the price of some produce. And if you take the example of oranges, forecasts are that the Brazil orange harvest will be significantly lower in 2024-25 than previously. The squeeze is on. There are similar issues in other commodities. 

The threat of greater scarcity raises big questions about how UK food retailers and foodservice companies engage with suppliers in future. Those relationships will be more important than ever.

Some retailers and suppliers have strong and deep relationships. However, too many retailer-supplier relationships are transactional at best and exploitative at worst. For suppliers, the threat of being delisted lingers. Even within one retailer, supplier relationships will vary hugely across different value chains. The major retailers and large multinational food brands still hold a lot of power. Could the power dynamic be about to change?

It’s easy to articulate what a retailer-supplier relationship shouldn’t be: one-sided, superficial, fleeting, opaque or dishonest. The public only hear about two types of supplier relationships: the ones that food companies want us to hear about – cherrypicked partnerships that demonstrate the values they want to portray – plus the examples of really bad practice that make it into the media.

As Guy Singh-Watson, founder of Riverford, argued, some major food retailers are ‘farmwashing’ as he called it: figuratively “stealing the clothes of real farmers and not paying for them” through fictitious farm brands and all that.

And it’s not just farmers that are feeling unfairly treated.

Many direct suppliers of supermarkets are finding it hard. The Groceries Code Adjudicator (GCA) continues to play a vital role in holding the largest retailers to account. The GCA annual survey 2024 showed how fairly – or unfairly – direct suppliers of the biggest grocery retailers feel they are being treated. There is a huge range in performance in terms of retailer compliance with the Groceries Supply Code of Practice. Retailers that have improved performance should be applauded, but others have got worse, and Amazon in particular is performing poorly.

Over and above striving to meet basic compliance, what does a meaningful supplier relationship look like? It’s more than not treating suppliers unfairly. Part of the solution might be in developing longer-term relationships – think a decade or even 20 years, rather than the next 18 months. It’s putting producers first, so they are more involved and empowered. I’d love to see values like honesty, openness, compassion and fairness brought to the fore too, clearly showing up in the daily to-do lists of employees at major retailers.

Those managing retailer-supplier relationships will need a whole new set of skills in the second half of the 2020s. You can’t build resilience in your supply chain unless you develop fair, lasting relationships with all your suppliers. Remember, you’re only as good as your worst suppliers. How you respond to scarcity will be the difference between your organisation surviving and failing.

Where to start? Pick a supplier. Pick up the phone.