Article by Paul Hargreaves
This wasn’t the intended subject for this week, but I was so annoyed by a meeting I had yesterday, I had to write something! A prospective supplier came to see me with a view to our stocking his range of products. They were good products and eminently suitable for our customer base of delicatessens, farm shops, food halls etc. Of the range of 12 products, unfortunately 3 were stocked in most of the major multiples including Asda and Tesco. For us, this wouldn’t be a complete disaster I thought, we can stock the rest of the range as well as an offering for the independents. Then we got onto the issue of price. To put this into context, most of Cotswold Fayre’s range is not represented in the major multiples, a few more products are on the shelves of Waitrose. If this is the case our existing suppliers will supply us at a lower price than the large retailers, despite our selling less volume than them. This means that we can sell to the independent retailers, we both make our margin and the consumer is paying a reasonable price for the goods, which may be the same or slightly higher than the Waitrose prices. This works well with a number of suppliers.
However, in the case it became clear that the company was supplying Asda and Tesco at considerably lower prices than their wholesalers. This meant that it would have been more cost effective for independent retailers to walk into Tesco or Asda, fill up a trolley and take the goods back to their shops to sell. Clearly they are not going to do this, because the retail price in their shops would be far too high. In this particular case the products which were on sale for £1.46 in Tesco and £1.44 in Asda would have been £2.35 in an independent retailer. A totally unacceptable scenario, my view is that we in the independent sector are all better off without this range of products.
The message from Cotswold Fayre to speciality food producers is clear! If you want to supply the major multiples, then that is your choice, but don’t pretend you have a brand for the independent shops and then go behind their backs offering huge and unsustainable discounts to the big multiples. The independent trade is your “bread and butter” and the natural and best route to the consumer for quality products. Products that truly reflect and take a serious and real account of all the ethical issues facing food production and consumption in the 21st Century. Independent food producers can be destroyed by that elusive “large account” that necessitates such low margins to be won initially and then even further discounts to be maintained on going.
My advice to speciality food producers is to strengthen and protect brand integrity. That is your most valuable asset and will have a value long after the discounts and payment cycles of the some of the multiples have destroyed your business.
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