Great for the consumer but not for anyone else
As the supermarkets battle it out to be the cheapest place to shop, the consumer is happy, however its bad news for food producers.
There has been a 28% increase in supply chains going out of business in 2014 according to Moore Stephens, which far exceeds other sectors.
146 food producer failures were noted and the price war has caused another period of deflation for the grocery market. It is thought that supermarkets "squeeze food producers in order to cut checkout prices and prop up profits."
Moore Stephens added that despite this, producers are reluctant to complain in the event that they lose their contract with a major player in the business.
Duncan Swift, who leads the accountancy's Food Advisory Group, said: "The supermarkets are going through the bloodiest price war in nearly two decades and are using food producers as the cannon fodderay video
"Supermarkets have engaged in questionable buying practices for years, but it's getting worse and clearly wreaking havoc on the UK food production sector.
"The fact that food producer insolvencies are rising so rapidly, while business insolvencies are falling overall, shows just how much pressure the sector is under.
"UK supermarkets are trying to compete on price with Aldi and Lidl but with profit margins that are far higher than these discount chains.
"To try and make the maths work, the big supermarkets are putting food producers under so much pressure that we have seen a sharp increase in the number of producers failing.
"The culture of the buying teams at the supermarkets is the big problem. Most supermarkets have banker-style trading floors and bonus schemes for their buyers."
The British Retail Consortium hit back and said said the report was "too simplistic."
Its statement said: "All major supermarkets know the only way to deliver consistent quality and value in a competitive market is by building long term sustainable relationships with their suppliers.
"That's why so many suppliers have worked with the same retailer for so lo
"It is far too simplistic to blame retailers for this. Firstly there may be a number of reasons for failure and we don't know if they supply retailers, and even if they do they are likely to have other customers.
"Secondly retailers operate in a highly regulated supply chain with a strict code of practice governing contracts and an adjudicator appointed by Parliament specifically to ensure fair dealing."
Source- Sky News
Tagged in Supermarkets