As dairy farmers are reported to be on their knees due to the competition by retailers to lower the price of milk to below production costs, the Panorama programme last night reinforced this heavy-handed approach. The programme reported that Tesco suppliers were suffering from aggressive buying with buyers "negotiating" by saying to suppliers " just give me" [whatever the amount] reflecting an arrogance and attitude of not needing to justify the demands. The programme reported heavy fines on suppliers if they did not meed targets or comply with demands.
Thankfully one large supplier L'Oreal is reported to have disputed £1m of charges and eventually came to an agreement with Tescos. But what is most worrying is that suppliers are being squeezed and yet not speaking out even with the protection of the Groceries Code, because no-one trusts the anonymity of the scheme. This is the same reason that employees fail to "whistleblow" because of potential repercussions. This reflects a general lack of trust in today's market.
Over the months this blog has emphasised that one of the ways to build trust is to treat all stakeholders fairly, including suppliers. And while many may think that the retailers have no responsibility for their suppliers, it's business after all, the consequence of screwing them to the wall is that the supplier ends up with no margin for investment and training thereby damaging sustainability. While the retailers may pronounce their actions are to create "better value" for customers, they are essentially short-term measures to compete without any view of the long-term.It is a shame that for a market leader like Tesco it is not in fact leading the sector in fair and ethical behaviours. It has lost its reputation and regaining trust across all stakeholders will take time but fair treatment and transparency are good building blocks and great ways to boost long-term value.Hopefully they will realise this soon!
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