Supplier cost pressures
Sir, Fmcg suppliers need to be better prepared for potential cost price discussions with retail multiples, following Tesco’s temporary suspension of Marmite and other Unilever brands last week.
With the fall in value of sterling, any supplier purchasing finished product, raw ingredients or packaging in either euros or dollars could face a hit on its profitability. Against a background of increased utilities, insurance, fuel and labour costs, many suppliers may not be able to absorb all of them.
However, if a supplier is considering a change in cost prices, it is essential that they are not only fully prepared but also take time to understand the retailer’s position in order to achieve an outcome that is mutually acceptable.
Suppliers need to build a category-based rationale to help defend their brands. We have already had a number of clients approaching us for guidance on how to deliver a compelling argument, how to position their rationale and how to overcome retailer objections. With this in mind, we have introduced a new service to our training offering designed to get suppliers ready for cost price discussions.
Andrew Cole, joint MD, Bridgethorne
Bad news for brands
Sir, A PR coup for Tesco. In one move it has highlighted its commitment to keeping prices low, positioned itself as consumer champion and created an opportunity to sell own-label alternatives. This is the kind of PR we’ve got used to seeing from the likes of Aldi and Lidl. Unfortunately this is bad news for brands, which will now struggle to push through legitimate price rises with other retailers, which will be emboldened by Tesco.
Michael Bennett, Pelican Communications
Licensing is a savvy move
Sir, A keen use of licensing can reap untold rewards for food & drink suppliers. LIMA’s 2016 annual report shows that food and drink is the sixth largest product type, with licensing in this category worth $14bn.
Licensing allows new or small producers to break into existing markets. The challenge is obvious. No matter your quality, people will prefer established brands and if the selling point is cost, then own labels will undercut. How can you attract a wider customer base? Licensing is one huge way forward.
Kelvyn Gardner, UK MD, Licensing Industry Merchandisers’ Association
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