Two-billion Tesco hit by supplier criticisms

Apr 18 2005 by Nic Paton Print This Article

Despite its record £2 billion profit, Tesco needs to take a long hard look at its relationships with its suppliers and how it is viewed by its customers if it is not to come unstuck in the future, a consultant has warned.

The retail giant this week [12 April] became the first UK retailer to break the £2 billion profit barrier, but at the same time fuelled criticisms that it is becoming too all-powerful.

Tesco now accounts for an estimated one in every eight pounds spent in Britain's shops, and its global empire is expanding rapidly.

But critics argue its buying power is cutting suppliers and farmers to the bone and its expansion into clothing, convenience store and town centre retailing is spelling the death knell for many high street and independent shops.

Paul Toyne, director of corporate social responsibility consultancy Article 13, said Tesco needed to look very carefully at whether these criticisms were starting to hit home.

"There is a general perception that it is squeezing the value out of its supply chain," he said.

For the moment this might not matter to its customers and shareholders who, it seems, are happy enough with its "pile it high, price it low" approach.

But the supermarket chain needed to look at positioning itself so that, if perceptions did start to change significantly, it did not get its fingers burnt, he argued.

Waitrose, for example, while admittedly aiming to attract a very different sort of customer, had proved highly successful in positioning itself as a "caring" supermarket when it came to sourcing of its products.

"Tesco needs to insure its UK market share, while still trying to grow. If customers and investors do start to worry about its practices then it will need to take that into consideration," Toyne said.

"There is a good rationale in being ahead of the curve, and Tesco has been fantastic at that in the past," he added.