SUPPLIERS are expected to feel the brunt of Tesco’s record £6.4bn loss after new boss Dave Lewis said 30 per cent of the group’s products are to be removed from shelves in a bid to cut costs and simplify the business.
It is not yet clear how many Yorkshire suppliers will be dropped from Tesco’s lists.
Workers at Rachel’s Organic yogurts have been put on notice of redundancy following the decision by Britain’s biggest retailer to stop stocking the brand from the end of April.
Another high-profile casualty is Kingsmill bread following Tesco’s decision to focus on Warburtons, Hovis and own-label brands.
Mr Lewis, dubbed “Drastic Dave” after his decision to cull jobs and close loss-making stores, said: “There will be some suppliers that lose listings, but it’s because customers are not buying the products. You don’t shed 30 per cent of the product range without some impact on suppliers.”
He declined to be drawn on how many suppliers will be affected, but said the process will take 18 months to complete. “Having taken 31 per cent more range into the business in the last two years we are taking that back. It does mean we’ll take ranges out of the business,” he said.
Suppliers are already feeling the squeeze due to a fierce price battle between Tesco and its main rivals, Asda, Sainsbury’s and Morrisons.
Some 146 food producers entered insolvency in 2014, up from 114 in 2013, according to accountants Moore Stephens. Tesco was hit by a £263m accounting scandal last year involving its relationships with suppliers after booking deals too early, prompting a criminal investigation by the Serious Fraud Office.
Tesco said it is increasing transparency and seeking to build “longer-term, mutually beneficial partnerships” with its suppliers as it tries to rebuild trust in the market.
It is also seeking to simplify the deals it negotiates with suppliers. It currently has over 20 different payment terms but plans to reduce this drastically.
Tesco’s biggest ever loss; Business Thursday