Tesco demanding more money

No surprise, of course. I predicted this would happen (not that I'm claiming to be a genius -- it's pretty obvious). This was in a newsletter I sent out last month on how the economic downturn would affect trade promo:

Herewith, a few guesses:

1) Retailers are going to demand significantly increased funding. Well, okay, I admit I’m not going out on a limb with this one – retailers always demand more money. But I’m talking about the possibility of demanding a lot more.

1a) An increased portion of the increased funding will go into pricing, to support the sort of pricing actions Home Depot is doing.

So what is Tesco doing? According to The Times, they held meetings last week demanding huge payments from suppliers to fund a price war:

Tesco is locked in a battle with suppliers this weekend after allegedly demanding one-off cash payments and keener terms to help fund its price war with rival Asda and discount supermarkets Lidl and Aldi.

Britain’s biggest supermarket chain spent last week conducting the tense negotiations. One supplier, who refused to be named, said that during a 40-minute meeting he was handed a document with the new terms Tesco was suggesting to maintain its profit margins.

It had no Tesco heading or logo. The supplier said he had been given a deadline of November 2 to agree to the new terms. “It was aggressive to say the least,” he said.

How should a supplier deal with this? The ones who will be prepared, as I said last month, are those who have the capability of analyzing pricing and promotion data and doing accurate forecasting.

... let’s examine the question of who benefits from this. The answer is not going to be a surprise: If there is an increasing emphasis on pricing, then the manufacturers who have tools in place to analyze and optimize pricing will be ahead of their competitors. Actually, they are already ahead, of course, but to whatever degree the emphasis on pricing increases, their lead increases.