Tesco squeezes suppliers to cut down prices

Supermarket giant Tesco is demanding grocery suppliers to cut down prices so it can pass them on to its shoppers, arguing that market is moving from “inflation to deflation”, in an attempt to get out in front of rival supermarkets by cutting prices more aggressively.

According to a report in The Times on Sunday (16), Tesco gave a presentation to its grocery suppliers on Thursday showing remarkable drop in input costs. Tesco, led by chief executive Ken Murphy, included charts showing a 50 per cent drop in wholesale electricity prices, a 22 per cent drop in plastic PET packaging prices, and an 84 per cent fall in the cost of freight over the past year.

Suppliers remarked that Tesco was being selective, pointing out that other costs, notably wages, are still rising.

“We’re working … with suppliers to mitigate the impact of inflation as much as we can, particularly as some commodity and input prices begin to fall. When we see opportunities to pass on savings to customers, we’ll take them,” a spokeswoman for the grocer told The Times.

It happened as after weeks of intense scrutiny for supermarket and food industry chiefs over “greedflation”. In recent months, the rising cost of food and drink has been primary inflation remains stubbornly high. The Which? grocery inflation tracker, based on the prices of 25,000 products across eight supermarkets, recorded 15.4 per cent for the 12 months to June, down from 16.5 per cent in May. The average across all eight big chains on a two-year basis is 25.8 per cent.

Meanwhile, Asda’s co-owner Mohsin Issa, and Sarah Cardell, the chief executive of the UK’s competition regulator, the Competition and Markets Authority, will be grilled by MPs on the outlook for food and fuel prices. In the run-up to Wednesday’s hearing, Issa wrote to MPs, stating that he expected food inflation to ease further during the UK’s summer growing season. He warned, though, that fixed-term contracts meant it would take between three and nine months for falling prices to feed through to consumers.

MPs are keen to grill Issa on the cost of fuel on Asda’s forecourts, after a recent investigation by the UK’s competition watchdog revealed that in 2022 drivers paid about 6p a litre more than as retailers increased profit margins. This ran contrary to evidence given by an Asda executive in a previous session, who said it was not doing anything differently.