Tesco CEO, Ken Murphy has said the supermarket has been “very robust” with suppliers as it looks “to maintain as low a cost price as possible.”
The comments come as Murphy praises the leading retailer for its “strong performances driven by all parts of the group,” despite battling inflation and seeing its profits halved to £753m.
He said that suppliers recognise the benefit of Tesco being able to decide what kind of pricing mechanism it wants to use.
“Our suppliers are integral to our business and we are proud of the long-standing partnerships we have built over the years.”
Maintaining relationships with suppliers
In recent weeks, the Big 4 grocer experienced backlash as chief product officer, Ashwin Prasad told suppliers there would be “additional fulfilment charges” for products sold through its online platform and via its Booker wholesale channel.
However, despite Groceries Code Adjudicator Mark White stating that he had been approched by suppliers with a number of complaints, Murphy said today (13 April) that the supermarket has already signed up “a meaningul number” of suppliers and is “very pleased” with the progress of the fulfilment fee.
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“I think suppliers have been very understanding about the significantly increased cost to fulfil the online missions, they understand that represents a very material part of the market and that they have been essentially getting a free rise for a number of years.”
He added that Tesco has had “very open, very straightforward” conversations with suppliers and is “very confident its going to be successful.”
Battling inflation
Within its latest finanical results, the business also noted that sales volumes held up well despite ‘cost-of-living pressures and further post-pandemic normalisation.’
Group sales excluding fuel edged up 5.3% to £57.6 million and Murphy said that despite customers “trading down,” Tesco is “really competitive” on a large part of its range, “which means shoppers do not have to worry about paying more.”
Earlier this week, Tesco extended its price lock on over 1,000 everyday products, in a bid to help shoppers save amid the cost-of-living crisis and dropped milk prices for the first time since May 2020 across its stores and online.
Depsite expecting the year to be inflationary on an overall basis, he said the retailer anticipates inflation to fall throughout the year.
“We’re really optimistic about sales for the coming year. Being a financially strong robust business is very important for the future of the food supply chain in the country, for our suppliers for all the colleagues that we employ.
“We’re the most competitive we’ve ever been in the market relative to all the other grocery retailers in the country.”
Online growth plans
Despite admitting that “conditions favour” discounters Aldi and Lidl as “they continue to lay down space,” he said that Tesco offers convenience.
He explained this is evidenced through its “resilient” online business.
“We started pre pandemic with an online business that was worth about £3 billion, now its worth about £5.5 billion and we have retained many of the customers that we won during the pandemic.”
Although Tesco expects the UK market to be “intensely competitive”, he added that it is “as well positioned as it could be.”
