(1888PressRelease)
April 28, 2009 - Alistair Darling, the Chancellor, announced a 2pc increase in alcohol duty last week. The rise was implemented at midnight on Wednesday, the end of Budget day.
In an email entitled "Duty – April 2009" sent to its beer and cider suppliers prior to the Budget, J Sainsbury said that it would be "replacing" any lines on June 1 "that we cannot maintain margin on" following the announcement of an increase.
The email sent by a Sainsbury's buyer instructed suppliers who were "not planning to absorb" the duty increases to send Sainsbury's a "mitigation plan for dealing with it". The supermarket suggested that mitigation could involve "additional promotional support" from the supplier or "delayed implementation" in the increase.
The email from the Sainsbury's buyer went on: "I will remind you all that my biggest challenge this year will be two percentage points margin growth and so this will be at the heart of every decision regarding duty and the range."
One supplier, who asked to remain anonymous, said: "They are saying 'If you don't absorb the duty increase we will delist you.'"
Supermarkets' relationships with their suppliers are governed by a self-regulating code of practice, a set of guidelines that was outlined by the Competition Commission almost a decade ago. The code was found to be inadequate and will soon be replaced by a tougher code, which will be overseen by an ombudsman.
Much of the original code is predicated on "reasonable" behaviour between supermarkets and suppliers. Many suppliers do not see unilateral demands from retailers as reasonable. However supermarkets argue that the code is not designed to shield suppliers from hard bargains driven by supermarkets.
Mike Coupe, Sainsbury's trading director, said that the chain aims to pay a fair price to suppliers whilst also offering customers low prices.
"It is always our aim to offer customers the best value at the fairest prices. Any situation that could result in higher prices will invariably lead to discussion as to how they can be avoided in the interests of our customers. We have long-term relationships with our suppliers," said Mr Coupe.
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