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Supermarkets attacked for price promotions and cost-cutting

The Institute of Sales Promotion (ISP) has today stepped forward with a damning report on the UK supermarket sector claiming that price promotions are "destroying brand strength and brand loyalty". The Institute has quoted figures which it claims show that over £14 billion was wasted on price promotions in 2009 with retailers using this particular ploy to attract more customers while allegedly "allowing" suppliers to take on 90% of the cost reductions provided.

This comes on the day when the Office of Fair Trading introduces the Grocery Supplier Code of Practice which has been created to protect suppliers and ensure long-term relationships between retailers and the supply chain. The code offers suppliers the opportunity to go to arbitration where there are issues regarding price, volume and ongoing business although ultimately which supplier would dare to fight back against one of the leading supermarket chains?

We have seen a number of investigations into the UK supermarket sector which have uncovered alleged pressure on suppliers, many of whom are surviving on wafer thin margins and are becoming more dependent upon volume alone. While there is no doubt that the Grocery Supplier Code of Practice will make the process and the system more transparent it remains to be seen whether any long-term advantage will be gained by those in the supply chain.

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