Food producer insolvency triples amid supermarket price wars

The number of food producers that have gone bust have tripled over the last five years as a result of the supermarket price wars, reports The Independent.

A survey by top 10 accountancy firm Moore Stephens said 162 food production companies fell into insolvency last year, more than treble the 48 insolvencies in the sector in 2010 and 11 per cent more than just a year ago.

It blames the supermarket sector’s ongoing price war, sparked by the growth on discounters Aldi and Lidl, which has seen major players such as Tesco and Asda cut prices to protect market shares.

Consumer prices have fallen in the supermarket sector for almost 18 months, according to respected consumer research body Kantar Worldpanel.

Moore Stephens said food suppliers are “bearing the brunt of the on-going supermarket ‘price war’ as their profit margins are squeezed by big supermarket chains trying to offer consumers the lowest prices possible whilst maintaining their own profit margins”.

It added that the squeeze on prices is set to continue as discounters gear up plans for expansion.

Earlier this year Aldi said it plans to open 80 new stores this year, creating 5,000 new jobs. The German-owned supermarket runs over 600 stores in the UK, and aims to boost this to 1,000 by 2022.

Duncan Swift, partner and head of food advisory at Moore Stephens, said: “With the likes of Aldi and Lidl announcing further plans for expansion, competition between budget and traditional supermarkets is only going to heat up.”

He added: “The extreme buying and retail pricing strategies of big retailers mean smaller food producers are struggling to stay afloat.

“Food supplier insolvencies are still rising as small producers continue to be the major casualties in the supermarket price war.”

Mr Swift added that with over 70 per cent of UK food suppliers produce “going across the buying desks of the UK’s top 10 supermarkets, the buyer power of supermarkets remains enormous”.