Tesco demands supplier price cuts in discount battle

Tesco has reportedly asked suppliers to agree price cuts as it steps up its battle with budget supermarkets.

The move is part of its shift to an "everyday low pricing strategy", which will see it use fewer promotions.

A Tesco spokesperson said: "We are committed to open, fair and transparent partnerships with all of our suppliers."

Tesco has given suppliers a deadline of 10 July to agree, according to the Grocer.

Several suppliers told the trade publication that they faced pressure from the supermarket to lower their prices.

Some raised concerns over the timescale of the demands, as well as a lack of clarity over how the change in promotions would work in practice.

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Tesco launched its "Aldi price match" promise in March, where products including fresh and freezer food are matched against those offered at the budget supermarket.

The supermarket announced in June that it has extended the scheme to nearly 500 Tesco and branded products in response to increasing competition.

"We have also reduced the number of short-term promotions, as we focus our investment on everyday low prices instead," it said.

A Tesco spokesperson told BBC News: "We have been speaking to suppliers about how we can work together to continue giving our customers great value.

"We don't believe that our customers should pay more for a brand in Tesco than anywhere else."

They added: "We are committed to open, fair and transparent partnerships with all of our suppliers, and that collaborative approach will continue as we look for new and innovative ways to bring our customers great value."

Tesco reported strong first quarter sales last week. The supermarket said that while the number of trips made by shoppers fell by nearly a third in the 13 weeks to 30 May, the amount being bought rose 64%.

In a trading update, Tesco said group sales had risen 8% to £13.4bn in the period, but warned that coronavirus-related costs were set to hit £840m this year.

Neil Shah, director of research at Edison Group, said that investors "should keep a close eye on the company, since the group operates in a crowded market with retailers Aldi and Lidl continuing to gain market share and current results might not be replicated when the UK is lifted from lockdown."