Blog: Dean BestSainsbury's, Wal-Mart inject positive tone - for some

Dean Best | 17 November 2008

It may be difficult to swallow for some, but the latest results from retail giants Sainsbury's and Wal-Mart last week injected a positive tone into the ongoing concern over the economy.

Sainsbury's, the UK's third-largest retailer, highlighted its "universal appeal" as it posted rising half-year sales and earnings, while Wal-Mart praised its "price leadership" for its own bumper figures.

However, today (17 November), the UK's ever-vocal National Farmers Union will accuse, among others, Sainsbury's and Wal-Mart's Asda of "outrageous bully-boy tactics" against suppliers as the economic downturn bites.

The NFU claims it has received an increased number of complaints from suppliers, who say supermarkets are demanding "unilateral price cuts", back payments and over-riders.

"There is enough flexibility in the margin taken by retailers to offer competitive pricing without reducing the price paid to farmers, growers and other suppliers. A continuation of this policy will see the agricultural production base in this country irreparably eroded with diabolical consequences for suppliers," NFU president Peter Kendall will tell a business meeting in Cardiff.

The debate over the power of the UK's largest supermarkets will never die and is sure to intensify as we navigate the current recession. And discussions between suppliers and retailers are likely to be as tense as they have ever been, particularly when looking at the financial results reported by some of the largest food manufacturers last week. Two of the UK's biggest names, Dairy Crest and Northern Foods, published mixed news. Dairy Crest saw its shares tumble after it issued a profit warning, while Northern said half-year profits had fallen 16% due in part to the weak pound.

On a brighter note, the weak pound should boost UK exports, which, in the food and drink sector at least, are showing signs of promise. According to figures out today, UK food and drink exports jumped 15.5% during the first six months of 2008 and look set to break the GBP13bn (US$19.41bn) barrier for the full year.

The US, meanwhile, looks set to enjoy something else that has become almost quintessentially British - a good old bunfight over the labels on food.

As we reported last week, the launch of the Smart Choices Program has been broadly welcomed across the pond as industry bids to show a united front in the fight against obesity.

However, some are calling for more research into the whole issue of nutritional labelling and into which schemes would prove most effective in changing consumer behaviour. Green ticks, stars... another debate that, it seems, is unlikely to be resolved quietly.


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