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Supermarket price war pushing hundreds of suppliers close to the edge - UK

| Supplier news

The ongoing price war between the supermarket multiples and discounters is pushing hundreds of grocery suppliers close to collapse.

Latest research for the first quarter of 2015 by Begbies Traynor, the insolvency practitioner, shows that the number of food and drink supplier in “significant” financial distress has risen 94% to 1,414 in the last year. The report also found the number of food retailers suffering financial duress has grown 66% to 4,696 businesses. This includes independent corner shops as well as larger grocery chains.

Julie Palmer, partner at Begbies Traynor, said: “These mass price reductions have severe consequences for less established food retailers and suppliers, particularly small and medium-sized enterprise [SMEs], who now seem to be locked in a David and Goliath-style battle, although this time it appears David can’t win.”

She added: “With £1 deals for fresh produce goods such as bread and milk remaining a firm feature at the major supermarkets, it’s no wonder that suppliers lower down the food chain are struggling to achieve a fair price for their produce.

“Meanwhile, wastage on farms continues to be a problem as suppliers are increasingly struck by last-minute order cancellations and overzealous cosmetic specifications set by the large supermarkets when it comes to the look of food that it will accept from farmers.

“Looking to the future, the picture only gets bleaker for small UK food suppliers, as German discounters, Aldi and Lidl, are predicted to capture 20% of UK market share.

“As the majority of Aldi and Lidl’s packaged stock comes from overseas, struggling UK suppliers could find themselves squeezed even further, if not stamped out altogether.”

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