A lesson in loss for suppliers

photo credit: pixelhut

Channel Five has been running an entertaining series called Breaking Into Tesco, in which entrepreneurial cooks, mentored by Royal Mail chairman Allan Leighton (a former Asda boss), are coached on how to pitch their ideas to the supermarket’s hard nosed buyers. What connects the contestants - including a man who has devised a hollow bread roll capable of holding soup - is the belief that winning a supply deal with Tesco is a recipe for riches.

But they need to get real.

Umq, formerly Unigate, does not have any problem devising, manufacturing and selling winning products to the likes of Tesco and Marks & Spencer. Its problem is making any profit whatsoever from the process. The company issued a profits warning and axed its dividend.

Why doesn’t Umq stand up for itself?

Because resistance in negotiations can be fatal, as became apparent when the company lost the Sainsbury’s desserts account last year. The negotiating muscle of supermarkets is a boon to shoppers, but many suppliers are squealing. With a high-street downturn looming, it is unlikely the pressure will ease up.