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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
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
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
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.”