View Full Version : Supermarkets' Emergency Plans to Keep Shelves Full

12-14-2008, 02:03 PM
The Observer (http://www.guardian.co.uk/business/2008/dec/14/retail-supermarkets-suppliers-credit-crunch)

Retailers fear collapse of lines of supply
Bailiffs prepare for busiest Christmas as shops go under

Zoe Wood, retail correspondent
The Observer, Sunday 14 December 2008

Fears that scores of supermarket suppliers will go bust next year have led the country's major chains to draw up emergency plans to replace them, The Observer can reveal.

Separately, on the high street, bailiffs are getting ready for their busiest Christmas ever, with a slew of retailers expected to go into administration.

Supermarket chain Asda, led by Andy Bond, is working on 'worst-case scenarios' across the board - combing its supplier base and examining alternatives to them. 'Suppliers are under a lot of pressure and there will be casualties,' said a senior executive at another store chain, which has already stepped in to pay troubled suppliers ahead of schedule. 'We need each other, it is not a zero-sum game.'

The need for alternative supply lines has been brought into focus by the collapse of Woolworths and its distribution arm, EUK, which supplied the supermarkets as well as Zavvi, the former Virgin Megastores, with CDs. However, cracks have been showing in other areas, with milk processor Dairy Farmers of Britain in the midst of a restructuring that will see two dairies close and up to 640 jobs lost.

The damage a collapsed supplier can do is laid bare at Zavvi, which has been destabilised during the most important sales weeks of the year. It has been forced to suspend its website with former parent Virgin stumping up a 5m 'fighting fund' to keep shelves filled in the key trading days left between now and Christmas. But with no obvious successor to step into the void left by EUK, Zavvi faces a grim outlook in 2009.

Tesco said it was supporting suppliers that needed extra help by giving an indication of future orders. 'The worst thing for a supermarket is for a supplier to go under, because you are left with a big hole and investing in a new one is a big deal,' said a Tesco spokesman.

Analysts say the supply of ready meals is vulnerable. Major players include the heavily indebted Premier Foods and Icelandic group Bakkavor. The latter has 140m trapped in collapsed Icelandic bank Kaupthing, although it says its UK operation, which supplies all the major grocers, is not affected.

Relationships between supermarkets and suppliers are often tense at the best of times. Suppliers hoping for additional protection from the powerful supermarkets - who have been accused of making unreasonable demands in price negotiations - look set to be disappointed as the Competition Commission's plan to create an ombudsman looks doomed. Asda will not sign up to the scheme, so the matter looks set for referral to the government's business department in the new year.

The collapse of Woolworths has come to symbolise the dire state of the high street, where retailers are facing the worst trading conditions in a generation. And with a spate of administrations expected early in the new year, bailiffs are gearing up for a festive feeding frenzy around 'quarter day' - when even struggling retailers must find three months' rent - which falls on Christmas Day.

'We have had more instructions than ever before and I've been in this career for 21 years,' said Jon Dawkins, chief executive of bailiffs' firm Dawkins, whose clients include the Crown Estate, Transport for London, asset managers Prudential and Threadneedle, as well as all the major property agents.

Landlords want to get their cash while retailers still have money in the tills after the Christmas rush - and before administrators are called in and cash is ringfenced for secured creditors.

12-14-2008, 02:59 PM
It's good to see that some supermarkets have proactive leadership within their management departments. With the JIT economy also involving food distribution to grocery stores, any disruption along the line could leave some shelves bare. Maybe even a lot of shelves. With the right kind of black swan event, even the whole store, or beyond.

That's why some of us are preppers to one degree or another.

12-14-2008, 03:13 PM
Walmart is famous for squeezing suppliers without regard to long-term viability.

This practice will universally come back to haunt us all.

12-16-2008, 05:02 AM
There is no profit for these businesses in preparing for difficult times. It is much better for this quarter's profits to ignore the possibilities, and let the shortages fall where they may.

Thess kinds of things will get talked about when there was a recent problem, but nothing will come of it. Do prep, but your neighbors will not, thus even the preppers will likely go down the drain with the rest of society, maybe a little more slowly and comfortably.

A.T. Hagan
12-16-2008, 12:54 PM
Yep, given a long enough running scenario where nothing useful is done to adress the situation then even most preppers must necessarily go down the drain along with everyone else.

But there are several ifs in there that may not come about. What personal preps buys you is time. Time to wait out a problem if it can be waited out. Time to more carefully examine whatever options one may have available to get out of a bad spot. Time for society to find its collective butt with both hands and begin to address its problems. Time that many others won't have because they have no margin, nothing to get by on, so must necessarily go to the wall sooner for lack of any choice.

Great Britain, the United States, and every other nation that has enjoyed economic prosperity for a long time are suffering from common problems. In their grocery stores one of those problems has been the slow, steady devotion of more and more square footage to... well, crap actually. Junk, highly processed foods of questionable to no nutritional value. And this space has come at the expense of the more traditional grocery items that used to occupy that space. The stores that haven't made that trade off did it by expanding to the point that they could shelve all of it which now means they've got more square footage than they can profitably manage.

The grocery business is undergoing yet another evolution. This newest one is a bit different than what came previously because this time it's an anti-economic change. There are a lot of highly leverage companies out there selling products of questionable value that may suddenly go 'poof' and disappear. There are also a number of companies that exist mostly due to the availability of fast, cheap long-distance shipping to bring us what used to be exotic items from afar like ethnic fresh foods and out of season stuff such as grapes from south (or north as the case may be) of the equator. Plenty of shoppers out there like myself who have to decide between three dollar a poung grapes from Chile or Florida tangerines for seventy five cents a pound (in Florida).

Money talks and in the grocery store more and more it is beginning to talk about getting the most real value for the dollar/pound/euro as possible.

Think of it as evolution in action.