Superstore price wars held liable for 146 food producer shutdowns
Food producers have become cannon fodder in the ongoing supermarket price war, according to the accountancy firm Moore Stephens LLP.
Analysts at Moore Stephens studied data at Companies House and found that 28% more specialist manufacturers have gone into insolvency this year compared to 2013.
In one of the larger cases, 170 jobs were lost when Sussex-based fresh pasta maker Pasta Reale Ltd went into administration in August after it lost three major supermarket contracts in a year.
Accountant and head of the food advisory group at Moore Stephens Duncan Swift said: “The supermarkets are going through the bloodiest price war in nearly two decades and are using food producers as the cannon fodder. UK supermarkets are trying to compete on price with Aldi and Lidl but with profit margins that are far higher than these discount chains. To try and make the maths work, the big supermarkets are putting food producers under so much pressure that we have seen a sharp increase in the number of producers failing.”
Each year Tesco, Morrisons, Sainsbury’s and Asda spend billions of pounds cutting prices in an effort to match the rates of German discount retailers, yet one million fewer customers are visiting the “big four” stores each week in favour of Aldi and Lidl.
Although regulations were introduced in 2010 in an attempt to protect suppliers and ensure that the prices were fixed by mutual agreement. Moore Stephens identifies this rise in insolvencies among food suppliers as worrying and a stark contrast to the overall 8% fall in liquidations in the economy as a whole over the same period.
The company estimates that over 300,000 agricultural firms are involved in the food supply chain within the UK with an additional 7,400 firms involved in food processing.