Inflation increases strain between supermarkets and suppliers

The increase in inflation and cost price has weakened the relationships between the UK’s supermarkets and their suppliers, according to the findings of the latest survey from the Groceries Code Adjudicator (GCA).

Supermarkets are facing a series of arbitration hearings with the GCA, after adjudicator, Mark White, revealed the number of requests for cost price increases (CPI) had resulted in a series of short notice de-listings.

An annual YouGov survey revealed that more than a quarter of suppliers (26%) had experienced a refusal by a retailer to consider a request for a CPI or an unreasonable delay from the retailer in concluding the request.

The survey highlighted an increase in problems with de-listing, which typically follows an unsuccessful CPI negotiation. One in every seven suppliers (16%) raised issues with de-listing without reasonable notice (compared with 12% in 2021).

The GCA described the grocery sector as suffering from a “perfect storm of supply chain shortages, and higher energy, raw material/ingredient, and packaging costs”. Some 80% of the 2,500 suppliers who responded to the 2022 survey had asked for at least one CPI in the previous 12 months.

White said: “Inflation has affected the entire groceries sector as witnessed by the sheer scale of requests from suppliers to increase prices.

“I am concerned that the pressure has impaired relationships and created wider problems. My priority is to work with all the retailers to ensure they treat their suppliers fairly as they navigate the cost price process during this difficult time.”