Food and drink buyers gain more power

4 January 2012

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4 January 2012 | Adam Leach

Buyers for retailers in the food and drink sector have become more powerful over the past five years, according to a report.

Sustainable Growth in the Food and Drink Manufacturing Industry, published by Grant Thornton on behalf of the Food and Drink Federation, found 77 per cent of respondents believe the balance of power has shifted in favour of retailers over the past five years. Just 13 per cent claim it has benefitted manufacturers, while 10 per cent report no change.

The report, based on 77 surveys and 30 interviews with food and drink manufacturing representatives, found the most significant factor contributing to the shift in power was the consolidation of retailers. These mergers and takeovers have given them greater power to negotiate better pricing and dictate what products are selected.

Although there has been an impact across the sector, SMEs emerged as hardest hit with 41 per cent affected. The consequences included fewer customers as a result of smaller businesses being taken over and a loss of bargaining power.

A respondent to the survey, who wished to remain anonymous, said: “Post consolidation, both the supplies and outlets have become more difficult markets to trade in and manufacturers have to deal with reduced margins.”

But although consolidation at the top of the chain has resulted in many of those lower down being faced with tougher negotiations and less flexibility, it has also provided advantages, such as being able to reach a wider market by getting on to supermarket shelves.

“Ten years ago, you couldn’t have such a wide distribution. Now, thanks to the retailers, you can get into half the households by having a successful product launch in Tesco,” said another respondent.

In November, a report by the National Farmers Union and the British Beer and Pub Association (BBPA) called for the government to offer support throughout the beer supply chain. Ralph Findlay, chairman of the BBPA, said: “It’s in all our interests, not just farmers, brewers and publicans, but anyone who cares about this country’s economy, or loves the British countryside and a glass of beer, that we sustain the grain to glass supply chain and everything that depends on it.”


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