WATCHING THE CORPORATIONS
Supermarkets Increase Profits by "Beating Up" Farmers
The big supermarket chains are "beating up" farmers and growers as they compete to offer lower prices and maintain their profit margins, the National Farmers Union (NFU) has warned. The union said it is currently looking into a number of complaints of "aggressive tactics" used by the major grocers against its members. The tactics are said to include demands for over-riders, sudden price reductions and changes in payment terms.
As the food, oil and credit crises have taken hold, it seems the UK's biggest supermarkets (Tesco, Asda, Sainsbury's and Morrisons) are openly ditching their alleged focus on food quality and green issues and are competing in a fierce price war to stop customers drifting away to lower-price supermarkets. But rather than sacrificing some of their own profit margins to cut prices, they have been demanding more price cuts from suppliers, using unfair and aggressive tactics. NFU president Peter Kendall initially made the accusations in a speech at Reading University on 10 November, 2008. On 12 November, he told Farmers Guardian that the NFU had been receiving an increasing number of calls from suppliers complaining that Tesco and the other big supermarkets were "dishing out harsh treatment" as they seek to compete with discounters such as Aldi and Lidl. "The NFU is very concerned that the major retailers, as part of a price war strategy to drive down the cost of food to their customers, are treating suppliers harshly," the union said. When asked by Corporate Watch to provide specific examples, the NFU refused to reveal any "specific, personal case studies." However, the tactics used by supermarkets against farmers are understood to include unilateral and sudden price reductions, demands for back payments and the use of over-riders. In a statement dated 14 November, Peter Kendall described the practices as "outrageous, bully-boy tactics", warning that "a continuation of this policy would see the agricultural production base in this country irreparably eroded with diabolical consequences for suppliers." Tesco, the UK’s biggest supermarket chain, responded angrily to the accusations, claiming it was "observing the Supermarket Code of Practice." In a statement, a Tesco spokesperson said lower prices currently being paid to suppliers were "the result of falling commodity and fuel prices." Earlier this month, Sainsbury's reported a 13% increase in half-year profits to £272m. Around the same time, Asda, the UK's second-biggest supermarket chain, reported a 6.9% increase in like-for-like sales in the three months to the end of September. Sainsbury's like-for-like sales over a similar period were ahead 4.3%, while Tesco reported a 4% rise in the three months to 23 August. Asda's owner and the largest US retail chain, Wal-Mart, has beaten recession forecasts by reporting a 10% increase in third-quarter profits. Its August-to-October profits were $3.1bn (£2.1bn), compared to $2.8bn last year. Almost 33% of Sainsbury's products are on special offer, compared to 25% a year ago. Sainsbury's plans to continue to heavily promote its recently introduced "Feed your family for a fiver" campaign. There is mounting evidence of changing shopping habits: higher sales of cheaper poultry and pork and trends toward selecting larger pack sizes. Bargain-hunting food shoppers are also boosting sales and profits at Asda, which has been running special offers at 50p and £1 and has led the way in cutting the cost of petrol, in a bid to pull in shoppers. Last month, Asda boasted that more customers spent more with it, lured by its 'Halloween specials' on kids costumes and party food. Yet, the NFU seems to still have hope that supermarkets could or would have better policies towards farmers. In a speech to the Cardiff Business Club on 17 November, the union's president, Peter Kendall, said: "The retailers, led by Tesco as the biggest and most successful, could go a long way to restoring public confidence in [the] free market system by demonstrating a new, fundamentally more responsible approach to retail policy." Singling out Tesco, the UK's biggest supermarket chain, he added: "It is not inappropriate to ask, in the wake of the damage done by unfettered, greed-motivated behaviour by some in the financial sector, whether Tesco should continue to chase every last pound of dividend for shareholders at the potential expense of massive damage to the rural infrastructure in this country." For more on supermarkets' practices, see Corporate Watch's report "What's Wrong With Supermarkets?": www.corporatewatch.org/?lid=2596
As the food, oil and credit crises have taken hold, it seems the UK's biggest supermarkets (Tesco, Asda, Sainsbury's and Morrisons) are openly ditching their alleged focus on food quality and green issues and are competing in a fierce price war to stop customers drifting away to lower-price supermarkets. But rather than sacrificing some of their own profit margins to cut prices, they have been demanding more price cuts from suppliers, using unfair and aggressive tactics. NFU president Peter Kendall initially made the accusations in a speech at Reading University on 10 November, 2008. On 12 November, he told Farmers Guardian that the NFU had been receiving an increasing number of calls from suppliers complaining that Tesco and the other big supermarkets were "dishing out harsh treatment" as they seek to compete with discounters such as Aldi and Lidl. "The NFU is very concerned that the major retailers, as part of a price war strategy to drive down the cost of food to their customers, are treating suppliers harshly," the union said. When asked by Corporate Watch to provide specific examples, the NFU refused to reveal any "specific, personal case studies." However, the tactics used by supermarkets against farmers are understood to include unilateral and sudden price reductions, demands for back payments and the use of over-riders. In a statement dated 14 November, Peter Kendall described the practices as "outrageous, bully-boy tactics", warning that "a continuation of this policy would see the agricultural production base in this country irreparably eroded with diabolical consequences for suppliers." Tesco, the UK’s biggest supermarket chain, responded angrily to the accusations, claiming it was "observing the Supermarket Code of Practice." In a statement, a Tesco spokesperson said lower prices currently being paid to suppliers were "the result of falling commodity and fuel prices." Earlier this month, Sainsbury's reported a 13% increase in half-year profits to £272m. Around the same time, Asda, the UK's second-biggest supermarket chain, reported a 6.9% increase in like-for-like sales in the three months to the end of September. Sainsbury's like-for-like sales over a similar period were ahead 4.3%, while Tesco reported a 4% rise in the three months to 23 August. Asda's owner and the largest US retail chain, Wal-Mart, has beaten recession forecasts by reporting a 10% increase in third-quarter profits. Its August-to-October profits were $3.1bn (£2.1bn), compared to $2.8bn last year. Almost 33% of Sainsbury's products are on special offer, compared to 25% a year ago. Sainsbury's plans to continue to heavily promote its recently introduced "Feed your family for a fiver" campaign. There is mounting evidence of changing shopping habits: higher sales of cheaper poultry and pork and trends toward selecting larger pack sizes. Bargain-hunting food shoppers are also boosting sales and profits at Asda, which has been running special offers at 50p and £1 and has led the way in cutting the cost of petrol, in a bid to pull in shoppers. Last month, Asda boasted that more customers spent more with it, lured by its 'Halloween specials' on kids costumes and party food. Yet, the NFU seems to still have hope that supermarkets could or would have better policies towards farmers. In a speech to the Cardiff Business Club on 17 November, the union's president, Peter Kendall, said: "The retailers, led by Tesco as the biggest and most successful, could go a long way to restoring public confidence in [the] free market system by demonstrating a new, fundamentally more responsible approach to retail policy." Singling out Tesco, the UK's biggest supermarket chain, he added: "It is not inappropriate to ask, in the wake of the damage done by unfettered, greed-motivated behaviour by some in the financial sector, whether Tesco should continue to chase every last pound of dividend for shareholders at the potential expense of massive damage to the rural infrastructure in this country." For more on supermarkets' practices, see Corporate Watch's report "What's Wrong With Supermarkets?": www.corporatewatch.org/?lid=2596