Supermarkets press suppliers to cut costs and slash prices

Powerful supermarkets have accused brand owners of "overpricing" products and called on them to slash prices as the financial downturn hits cash-strapped shoppers.

Bosses from Britain's leading multiple supermarket chains want all their suppliers to review prices as they compete fiercely for business and stem the loss of trade to hard discounters.

Speaking at the IGD think tank's annual convention in September, Sainsbury chief executive Justin King, who will replace Nestlé UK boss Alastair Sykes as IGD president in January, said: "More brands are promoting because they have been overpricing."

King remarked that Sainsbury's 'switch and save' initiative was not "brand knocking". "Today's consumers are switching away from brands and we are just kicking at a rolling ball," he said.

Tesco executive director Lucy Neville-Rolfe said: "Customers always want their shopping to cost less - today more than ever." While this didn't exclude considerations such as the environment, she added: "Going green has got to be affordable."

Her comments came as Tesco revealed it was demanding more favourable terms from its suppliers. In a veiled warning, Neville-Rolfe said: "We will continue to work with suppliers that can give customers what they want at a price they can afford."

Asda group marketing director Rick Bendel said: "They [consumers] are cutting their costs vigorously - are you? In the supply chain, isn't there money to come out?" Overtly sniping at Tesco's recently launched tertiary Discounter brand range, Bendel added: "Is private label the weapon of affordability or just a range extension? Because more and more just costs more."

Sykes also warned against concentrating on price to the exclusion of all else. "Food price is high on the agenda but it's important we don't lose sight of health and sustainability. We need to continue to lead in these areas, despite pressure elsewhere."

This view was supported by fresh IGD consumer research. Reporting on this study, IGD chief executive Joanne Denney-Finch stated: "We will go back to value but we will stay true to our values - people are not compromising." But she also noted that there was room for further cost cutting, with supply chain studies showing that "20% of costs added absolutely no value"

She referred to trading relationships between suppliers and retailers being "put to the test", adding: "That is sure to apply for the next 18 months."

Because of the pressure on price, big brands were refocusing their efforts on developing nations, she claimed. "Branded players are no longer dependent on the developed economies."