Supermarkets Squeezing Out Small Food and Drink Suppliers?

Recent reports have exposed the risk of insolvency to Small and Medium Enterprise (SME) food and drink suppliers – including farmers – as a result of a “price war” between the main UK supermarkets. The “big four” supermarkets are currently in fierce competition with each other after losing some of their market-share to German-owned discount supermarkets who are able to offer very low prices.

In order to compete, the “big four” have aggressively cut their prices, which has had the knock-on effect of squeezing their suppliers’ profit margins and causing an extension of payment terms. Begbies Traynor has released figures stating that 1,410 of such SMEs were in “significant distress” in the three months to the end of December 2014, (which is an increase of 92% for the same period in the previous year). Furthermore, it is suggested that because these German-owned discount supermarkets source much of their stock from overseas, then the UK SMEs are not seeing a great deal of benefit from the rise of these supermarkets. This research corroborates Moore Stephens’ earlier estimate that 28% more food suppliers had gone into insolvency in 2014 than in 2013.

If you are recognising these stresses in your food and drink supply business, then a confidential discussion – at an early stage – with an experienced and qualified specialist to talk through the range of options available may well be an appropriate course of action. Please contact us if you would like an initial consultation, free of charge.