// Tesco has reverted to asking suppliers to pay fixed fees to support product promotions
// The grocer has returned to using ‘back margin’ payments, which former boss Dave Lewis moved away from, to minimise price rises by suppliers
Tesco is seeking to ramp up fixed fees it receives from suppliers to support product promotions.
The grocer has been requesting the so-called ‘back margin’ payments, which previous CEO Dave Lewis moved away from, during recent negotiations with suppliers over cost price inflation (CPI), according to The Grocer.
The move comes as Tesco and the rest of the grocery sector faces CPI requests from across its supply chain as commodity costs continue to soar and the war in Ukraine exacerbates matters. The tactic can help Tesco minimise inflation.
READ MORE: From Tesco to Superdrug: how retailers are tackling the big pricing problem
Back margin was a practice commonly used by Tesco before ex-Unilever exec Lewis took over. Under his leadership, the grocer changed its focus to everyday low prices rather than promotions.
The Grocer reported that Tesco had been offering a sliding scale of charges on promotions in recent negotiations, such as product placement on gondola ends or markers on shelves in the aisle.
Tesco confirmed it now uses five forms of back margin, compared to the 24 ways it used before Lewis’ tenure.
Tesco chief product officer Ashwin Prasad said: “We’re working with our supplier partners to navigate the pressures of inflation and deliver the best possible value for our customers.”
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