UK grocers and suppliers feuding over food prices

December food costs rose by nearly 17%

The boss of Britain’s largest sandwichmaker says price negotiations with supermarkets have become so strained amid the inflation crisis that sometimes walking away is the only option.

“In certain cases we’ve said to people ‘If you’re not prepared to take this price, we’re not prepared to supply you’,” said Dalton Philips, CEO at Greencore Plc. “In fact, we’ve just done that with a very large customer.”

Dublin-based Philips, who previously ran Morrisons supermarket in the UK, declined to name the retailer but said it’s clear there’s “real pressure in the supply chain.”

The dispute is the latest evidence of increasingly fraught negotiations between retailers and producers as both parties seek to protect their margins from growing costs.

Feeling the squeeze

A record spike in food prices at a time when Britons’ incomes are falling in real terms means supermarkets have to fight hard to keep prices down or risk losing market share to cheaper rivals.

Grocers are now demanding more detail from food producers to justify why their prices are rising and suppliers are trying to push through multiple pricing requests a year, up from one annual round before the cost-of-living crisis. The pressure is only likely to continue this year with food prices still rising despite signs that broader measures of UK inflation are starting to ease.

Price accelaration

Some of the world’s biggest consumer groups have been warning for some time that rising energy and labour bills mean prices will have to rise further in 2023. Last year Kraft Heinz Co. temporarily stopped supplying ketchup and baked beans to Tesco as disputes over pricing started to escalate. For a spell Mars Inc also stopped supplying its pet food brands Whiskas and Pedigree to Tesco after a separate tussle over costs.

In December food costs in UK stores accelerated by nearly 17 per cent, the quickest pace since records started in 1989, according to the Office for National Statistics. The war in Ukraine has pushed up the price of fertilizer and animal feed as well as energy and that’s meant that suppliers are having to approach the supermarkets far more frequently.