Tesco profits overstatement highlights tough treatment of suppliers

Problems over supermarkets levying financial contributions from their suppliers and how they account for these contributions are widespread and need to be addressed.

Partner Duncan Swift, who leads our Food Advisory Group, comments:

“The Tesco scandal highlights the supermarkets’ reliance on supplier contributions – it is a significant and growing problem across the sector that needs to be addressed.

“All the major supermarkets put onerous requirements on their suppliers to make contributions for things like promotions and general marketing. The current price war between the supermarkets mean this pressure on suppliers is fiercer than ever.

“One way to shine a spotlight on these practices would be to force supermarkets to disclose supplier contributions in their trading statements. This would help shareholders and the Groceries Code Adjudicator to monitor the extent of supermarkets’ reliance on supplier contributions.”

We estimate that these financial contributions are worth several billions of pounds per year to the top ten supermarkets.

An analysis by our team found that the top ten supermarkets owe suppliers approximately £15 billion in supplier debt at any one time.

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