The industry is at war with itself, and the cause is obvious, but the solutions are not

It might not have felt like it but, since 2014, retailer-supplier relations have enjoyed a tense benevolence.

It started with Tesco’s profits overstatement, which identified behaviours that in truth were more widespread than anyone cared to admit. With Tesco dropping almost all forms of commercial income, others followed suit – aware Tesco had only escaped fines from the Groceries Code Adjudicator as its powers in that regard had not yet kicked in.

Relations reached their benevolent zenith in the pandemic, where a spirit of collaboration to maintain supply and feed the nation coincided with a felicitous decline in promotions.

Those days are firmly over. This year’s GCA survey shows an industry at war with itself, with the number of disputes going backwards for the first time since the survey started, as the supply crisis of 2021 (which was met with shared acceptance) morphs into something more febrile and damaging. As we revealed last week, Tesco has even brought back many of the back margin techniques in its recent bargaining. But that’s just the tip of an iceberg as the Adjudicator reports significant delistings at the retailers.

The cause is obvious – the cost of living crisis – but to be fair the situation is understandable on both sides, with the scale of cost price increase requests and the need for buyers to challenge them in the interests of customers and custom, set against inarguable factors presented by suppliers.

It’s also the case that buyers are, in some cases, passing on price increases faster than the 12-week ‘reasonable notice’ period to which others slavishly adhere.

But even where it’s 10 weeks or eight, or six, it’s often not fast enough. Suppliers are being given ultimatums by their own suppliers requesting either to pay the new price there and then or they stop supply. Any sort of lag in recovering cost price increases from retailers in those circumstances places a huge strain on cash flow for suppliers. In theory supermarkets are able to agree cost price increases at the same pace. Whether they want to is another matter. But like their suppliers, they may not have a choice either.