In the same week Tesco racked up record profits of £3.1bn, it emerged that the retailer was calling in suppliers to demand cost price reductions of up to 3%.
Suppliers told The Grocer they were called in and told by buyers there was a "new target from above" - and unlike on previous occasions, the price cuts would not be used to fund cheaper prices in-store. Two suppliers said they had been asked to improve Tesco's margins by 1% and 3% respectively.
"Everyone has been told to better its margins," said one supplier. "Our costs from our suppliers have gone up about 40% over the past year. When we initially went in we thought we would be able to ask for price rises, but there is no way that will happen now."
Tesco told The Grocer the negotiations were an annual event: "Last week was a standard review with our suppliers, which we hold at the beginning of every new financial year."
However, a separate supplier of brands said he no longer made any money from selling to Tesco, but felt compelled to continue supplying it because the retailer made up one third of his sales, and the loss of trade would damage the brand. "Tesco is starting to become bad business, but at a third of UK business it is a difficult dilemma."
Another separate branded supplier to the big four said the tactics of all four had changed since early 2009, with buyers adopting new measures to squeeze greater efficiencies out of the supply chain: "They are all moving heavily towards £1 lines and we are discussing what we can do because that is what they all want."
New TNS data shows more customers switching to Asda than any other retailer, as price becomes the dominant concern for most consumers, while Tesco is seeing the highest number of defections. The switching data, seen by The Grocer, shows shoppers spent £115.5m more in Asda in the 12 weeks to 22 March compared with the same period last year. A large chunk of that, £33.3m, was gained from Tesco.
Tesco also lost out to other retailers, with £19.8m diverted to Sainsbury's and £7.6m to Aldi.
TNS market share data for the 12 weeks to 19 April shows Asda is increasing its share of grocery, up 0.3 points to 17.2%, while Tesco has slipped 0.5 points to 30.6%. Sales overall rose 6.2%, with Sainsbury's showing the biggest increase of 8.1%, and Asda at 8%. Morrisons increased sales 7.4% and Tesco 4.6%.
Suppliers told The Grocer they were called in and told by buyers there was a "new target from above" - and unlike on previous occasions, the price cuts would not be used to fund cheaper prices in-store. Two suppliers said they had been asked to improve Tesco's margins by 1% and 3% respectively.
"Everyone has been told to better its margins," said one supplier. "Our costs from our suppliers have gone up about 40% over the past year. When we initially went in we thought we would be able to ask for price rises, but there is no way that will happen now."
Tesco told The Grocer the negotiations were an annual event: "Last week was a standard review with our suppliers, which we hold at the beginning of every new financial year."
However, a separate supplier of brands said he no longer made any money from selling to Tesco, but felt compelled to continue supplying it because the retailer made up one third of his sales, and the loss of trade would damage the brand. "Tesco is starting to become bad business, but at a third of UK business it is a difficult dilemma."
Another separate branded supplier to the big four said the tactics of all four had changed since early 2009, with buyers adopting new measures to squeeze greater efficiencies out of the supply chain: "They are all moving heavily towards £1 lines and we are discussing what we can do because that is what they all want."
New TNS data shows more customers switching to Asda than any other retailer, as price becomes the dominant concern for most consumers, while Tesco is seeing the highest number of defections. The switching data, seen by The Grocer, shows shoppers spent £115.5m more in Asda in the 12 weeks to 22 March compared with the same period last year. A large chunk of that, £33.3m, was gained from Tesco.
Tesco also lost out to other retailers, with £19.8m diverted to Sainsbury's and £7.6m to Aldi.
TNS market share data for the 12 weeks to 19 April shows Asda is increasing its share of grocery, up 0.3 points to 17.2%, while Tesco has slipped 0.5 points to 30.6%. Sales overall rose 6.2%, with Sainsbury's showing the biggest increase of 8.1%, and Asda at 8%. Morrisons increased sales 7.4% and Tesco 4.6%.
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