Hobson: Distressing State for Suppliers of Food

THE WEEK: Food suppliers are stuck between a rock and a hard place, while BP for once has some news to cheers, says Morningstar columnist Rodney Hobson

Rodney Hobson 16 January, 2015 | 12:13PM

Starving to Death

Our determination to demand cheaper food from supermarkets is having a chain effect that is causing severe pain among suppliers. Do not assume that only the smallest ones at the start of the food chain are suffering.

Premier Foods (PFD) earned a load of opprobrium just before Christmas by trying to force its suppliers to pay for the privilege of staying on its books. Surely, the press argued, Premier should be paying the suppliers, not the other way round.

This cry of outrage rather took away attention from the fact that this is common practice among supermarkets and their suppliers. It is quite normal for supermarkets to demand that suppliers pay for shelf space or contribute to advertising and special promotions. Such demands are inevitably pushed down the line.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Associated British Foods PLC1,946.50 GBX-2.04
Begbies Traynor Group PLC97.23 GBX0.24
BP PLC310.50 GBX0.08
JD Sports Fashion PLC648.60 GBX-0.49
Premier Foods PLC90.80 GBX1.23

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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