Advertisement

Lidl to spend an extra £2bn on UK suppliers as rivals caught in price rows

Lidl commits extra £2bn to buy British as Tesco and Waitrose fall out with suppliers
Lidl commits extra £2bn to buy British as Tesco and Waitrose fall out with suppliers

Lidl has pledged to spend an extra £2bn to buy British products after Tesco and Waitrose came under fire over wranglings with suppliers.

Britain's second fastest-growing supermarket said it would spend £4bn with UK suppliers this year, meaning it is now on course to spend a total of £17bn between 2020 and 2025. This is £2bn more than initially planned.

The move was touted by Lidl as "cementing its support for suppliers across the country", coming amid growing tensions between rival supermarkets and well-known grocery brands and farmers.

Earlier this month, Tesco faced a backlash after its chairman John Allan said it was "entirely possible" that food producers were taking advantage of inflation to push up their prices more than necessary.

The National Farmers' Union president Minette Batters accused Mr Allan of living in a "parallel universe", given the scale of the cost increases many farmers and growers had seen.

Supermarkets have been taking more aggressive approaches in their pricing talks with suppliers, amid pressure to keep their own prices lower for customers during the cost-of-living crunch.

Heinz last year disappeared from Tesco shelves following a row over how much prices could go up, although the pair later came to a deal.

Morrisons chief executive David Potts, meanwhile, last week said it was also taking a tougher approach in talks with suppliers. It owns more of its supply chain than rivals, but said it was still having a "robust conversation even if we are the supplier ourselves".

Waitrose has been cutting back how many products it stocks on its shelves, with major brands Mornflake and Warburtons among those to have been affected by the changes.

Sources told the Telegraph earlier this month that the supermarket had been rationalising its range to make their supply chain more efficient and to cut costs. Mornflake bosses said they were "very disappointed" over the move to delist its products.

Lidl has made the pledge to spend more on British suppliers after luring more customers in recent months, as shoppers scramble to find the best deals.

The latest Kantar data showed sales at Lidl were up 24pc year-on-year in the 12 weeks to Christmas Day, slightly below Aldi's 27pc growth, but significantly higher than 6pc growth at Tesco, Sainsbury's and Asda.

Ryan McDonnell, chief executive at Lidl GB, said: "The farmers and producers that supply us, some of which have been with us for decades, are paramount to the success of our business."

Clive Black, an analyst at Shore Capital, said both Aldi and Lidl had been "very switched on" in getting more local suppliers. "They know that, as German discounters, they need to win over certain hearts and minds in the UK."

However, he said figures seemed to suggest that the discounters were using a loss-leading strategy on some items, ultimately selling some products at a loss to get customers through the door.

He said: "If suppliers want a truly sustainable UK farming sector then they need to be careful what they wish for because it goes to a model which is wholly dependent on discounters, then that means a lot of value is taken out of the system."