Tesco is changing the way it charges its suppliers by cutting the number of ways it can seek payment from 24 to three, Dave Lewis the CEO of the company has said.
In an interview with the Grocer recently, Lewis said that Tesco plans to make the cut from 24 to three by 2017. This is in the wake of the grocery industry’s watchdog investigating the company over a £263m accounting scandal linked to the company putting off costs to inflate profits.
He said that this year Tesco would reduce the number of ways it can seek payment from suppliers to five and by 2017 the company will cut the number of reasons to demand a bonus payment from suppliers to three.
Volume, premium positioning on the company’s shelves and compensation for items that need to be recalled will be the three reasons, Lewis said to the Grocer. Lewis, a former executive at Unilever, said that the changes were afoot after speaking to Tesco’s suppliers “from sheep farming through abattoirs through food processors”.
“When you don’t grow, then you start doing things to your business that exacerbate the problem. You end up over-proliferating the range. Commercial income becomes more important than customer choice,” he said. Marketing and advertising are not included on the list of allowed payments.
Figures recently released from Kantar Worldpanel showed that as of March 1 2015 Tesco increased their sales by 1.1% in the 12 weeks to March 1 and this was Tesco’s best performance in 18 months. Sales dropped at all three of Tesco’s major rivals, Sainsbury’s, Asda and Morrisons in the same period of 12 weeks, the figures from Kantar also show.