Supermarket Price Wars Affect on Food Producers and Wholesalers

It’s been no secret that there’s a price war going on at the moment between the major supermarkets due to the attack from the discounters. This may be good news for consumers, with lower prices in store and deflation of food and drink prices, but not so good news for the food producers.

Research from Moore Stephens has shown that 146 food producers went into administration this year, compared to 114 last year, which is a worrying sign.

With the supermarkets putting added pressure on supplier costs, this has meant that the margins made by the supplies are far less than before, and can tip the supplier into administration. This coupled with the long payment terms of the supermarkets means that the suppliers have a cashflow problem, and end up running out of cash.

Are we due to see the effects of this in the wholesale market? At the moment, there may not be a price war waging between the wholesalers, but the food suppliers also supply to wholesalers and food service companies too. Thus, with fewer suppliers in the market and less competition, this may lead to higher prices in the future too.

It will be interesting to see how prices will be affected in 2015 with fewer food suppliers, and the impact of the discounters moving into the convenience store sector too. 2015 will certainly be an interesting year in the wholesale market!

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