Farmers v Supermarkets - the battle continues

A good example of some of the challenges of the customer-supplier relationship in the Guardian today….

The President of the National Farmers Union is accusing big supermarkets of using “bullyboy” tactics to renogotiate supply contracts with farmers ahead of a new industry code of practice.

Lots of useful insights into the tensions & potential conflicts that exist between suppliers (farmers) and customers (retailers) in this industry - despite the politically correct quotes from the retailer side of the argument!

The key point for students to remember is that grocery retailers operate in a highly competitive environment where price is a key competitive weapon. They need to maintain gross profit margins whilst competing effectively on price. Perhaps inevitably, this places pressure on the terms of their supply contracts with farmers. And it doesnt take an expert to work out which side of the contract currently has the great bargaining power (a nice link to Porters Five Forces to help explain the incidence of low profitability in the farming industry)