Supermarket buyers have been using avoidance tactics or flat-out refusing to engage over requests for cost price increases from suppliers.
This is according to a YouGov report commissioned by Groceries Code Adjudicator Mark White, which was released at this week’s GCA conference in London.
Analysis of the report by trade publication The Grocer suggests retailers viewed the 2023/2024 financial year as a chance to “reset” their businesses after years of disruption from the pandemic and the cost of living crisis.
However, in-depth evidence submitted as part of GCA’s annual survey found that some suppliers still faced continued high commodity prices and came up against a brick wall when it came to trying to get CPI requests approved.
White noted that the findings of his report showed “signs of improvement” overall in the relationship between suppliers and retailers, but he claimed the dynamic had become “more complex”. He acknowledged that a raft of categories still faced cost-price pressures, but suppliers were facing point-blank rejections from supermarkets to discuss the issue.
The Grocer highlighted that 14% of suppliers claimed to have had their products delisted without reasonable notice in the past year, partly as a knock-on impact. While that was a 1% improvement from the previous year it was, White said the figure was still “far too high”.
Gavin Ellison, research director at YouGov who compiled the report for White, said: “Cost recovery is still at an existential point for some suppliers who are reliant on expensive commodities (cocoa, glass, bread etc.)”
He added: “Retailers that had previously granted CPIs are now using avoidance tactics or flat-out refusing to engage. A minority of suppliers are still trying to push historic CPIs through from 2022/23 that were rejected at the time by buyers.
“Retailers are continuing to ask for extensive evidence for cost justification, including ‘efficiency initiatives’.”
The Grocer said that the report highlights supermarkets have shown less “compassion and understanding” with the plight of suppliers facing rampant inflation. While most delists had been done “by the book”, it said the use of “thinly veiled threats” of delists had become common as supermarkets used the tactic to keep prices down.”
“Overall inflation rates [falling] mask varying costs of different inputs, with some still rising and others falling,” White told delegates at the conference.
“The result of all of this is that some suppliers are still asking for cost price increases, whereas, for certain products, the retailers may be asking suppliers for cost price decreases.
“While the reduction in CPI requests being made by suppliers is welcome, there is now greater complexity. One knock-on effect is retailers delisting products.
“Several suppliers have also told me about retailers using the threat of delisting as a tactic during negotiations.”
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