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Supermarket price war hurts UK SME food suppliers


As the supermarkets battle to be top dog, research shows smaller UK food suppliers and grocers are suffering, highlighting the need for them to cut costs.

The number of small and medium-sized (SME) food suppliers experiencing financial distress has more than doubled in 12 months, according to Begbies Traynor’s Red Flag Alert report for Q1 2015.

The research, which monitors the financial health of UK companies, found that supermarkets’ turnaround strategies, generally involving slashing prices and delaying payments, is piling pressure on the smaller businesses that supply them. Begbies Traynor warned that SME food suppliers are “being flattened by this new savage landscape in the UK retail food industry”.

“[M]ass price reductions have severe consequences for less established food retailers and suppliers, particularly SME’s, who now seem to be locked in a David and Goliath-style battle; although this time it appears David can’t win,” said partner and retail expert at Begbies Traynor Julie Palmer.

Last-minute order cancellations, overzealous cosmetic specifications and the rise of discounters such as Aldi and Lidl, which import much of their stock, may see struggling UK suppliers squeezed even further, Palmer warned.

“The introduction of the Prompt Payment Code and the powers given to the groceries code adjudicator to fine supermarkets in breach of the Grocery Supply Code of Practice have only had a minimal impact, and these latest Red Flag figures indicate that they may simply be too little too late for many in the SME supply chain.”

Cutting costs

Bleak short- and medium-term growth prospects mean that smaller UK food suppliers must urgently look to cut costs wherever possible. Energy bills remain a significant expense and, as other issues have been prioritised, many businesses are needlessly paying too much.

SwitchMyBusiness.com offers a straightforward solution, cutting bills by up to 70%, with exclusive supplier rates. Thousands of businesses have already saved an average of £747 per switched meter with a call that takes less than five minutes.

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