Food bosses have slammed comments by Tesco chairman John Allan that seemingly accused suppliers of profiteering from inflation.
Allan yesterday told BBC presenter Laura Kuenssberg Tesco had “fallen out” with multiple suppliers in what he described as “robust” talks over CPI requests.
His remarks follow those earlier this month of Tesco CEO Ken Murphy, who described how the UK’s biggest supermarket was in a “constant battle” with suppliers to try to keep prices down.
“There have been very robust discussions between Tesco and a number of suppliers,” Allan, who is retiring as chairman next year, told Kuenssberg, pointing to Tesco’s bust-up with Heinz last year as an example of how it was prepared to get tough on suppliers.
“We didn’t have Heinz soup and tomato ketchup last summer when they tried to put through a large price increase that was eventually settled,” he said.
“We’ve fallen out with other suppliers so we do try very hard to challenge cost increases.”
NFU president Minette Batters led the backlash against Allan’s remarks, saying she was “baffled”.
“It was almost like he was living in a parallel universe,” she told The Today programme this morning. “For primary production from farms and growers this has been absolutely unprecedented.
“We’re seeing wholesale gas prices 600% higher than they were in 2019. And the cost of inflation on the back of that has dwarfed any price increases to date.”
FDF CEO Karen Betts also claimed Allan’s comments ignored the huge cost pressures facing suppliers.
“Food suppliers have all seen a massive increase in their input costs over the last couple of years,” she said. “They have seen the impact of Covid, the war in Ukraine, the costs of Brexit when moving products across the border. Those price rises reflect the rise in ingredient costs, energy costs, taxation costs and labour costs.
“All our suppliers know they have a huge responsibility to keep food affordable,” Betts added. “If they can’t pass these costs on, more businesses will go out of business. They can’t operate at a loss.”
The FDF boss accused Tesco and other supermarkets of demanding to see sometimes confidential supplier information to justify CPI requests.
“The supermarkets are very tough. Most supermarkets are asking suppliers to open their books to justify line by line where the price increases are coming in, so it’s difficult for Tesco to come out and say that companies are profiteering. They have the evidence.”
Shane Brennan, CEO of the Cold Chain Federation, described Allan’s remarks as “an ominous statement of intent” warning they could damage years of collaboration between supermarkets and suppliers, during Brexit and the pandemic.
Ged Futter, founder of The Retail Mind, said Allan’s comments were “outrageous”, adding suppliers had no choice but to pass on cost increases or go bust.
“What he’s failing to recognise is we are seeing inflation at levels we have never seen before. He will never have seen inflation like this in his career.
“The prices are going up by 50% in some categories – that is going to lead to high prices. The suppliers’ responsibility is to make sure they look after their costs so they can survive.
“It’s quite disingenuous to accuse suppliers of profiteering.”
Despite Allan’s comments, The Grocer revealed last week that Heinz has driven through hundreds of price increases across every supermarket this month.
Almost 500 listings including baked beans, tomato ketchup, and tinned spaghetti, shot up in price during the first two weeks of the year, in some cases by over 80%.
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