EXCLUSIVE: Suppliers under fire over PMP squeeze

Wholesalers claimed suppliers have been passing the 'burden of inflation' onto retailers

Suppliers are facing criticism for reportedly passing the “burden of inflation” onto retailers by squeezing the margin on price-marked products (PMP).

Recent pricing from wholesalers seen by Better Retailing have revealed that the retail margin on a number of core PMP impulse lines has shrunk. The margin on £1.89 2L 7Up dropped from 44.44% to 27.94%, while the profit on £1.49 500ml Monster Energy fell from 40.27% to 35.84%. Meanwhile, 500ml £1.09 Levi Roots sauces saw their margin decline from 38.44% to 31.65%.

Popular chocolate bar lines were also affected, with the margin on £1 Dairy Milk Chopped Nut falling from 20.91% to 18.18%.

According to one major wholesale source, the margin shared between wholesalers and retailers had also shrunk due to price increases from suppliers. They claimed margin on £1 Mars treat bags reduced from 26% to 23%. The PMP on Mars Bar and Snickers had also risen from £1 to £1.25, although the shared margin fell from 20% to 18%.

The source, who asked not to be named, criticised suppliers for passing the “burden of inflation” onto independent retailers. They said: “Suppliers think it is acceptable to hold the PMP while proposing a price increase. Retailers have no opportunity to recover lost margin. This is at a time when they are already seeing an increase in operating costs, through escalating wages and energy costs.”

Unitas Wholesale managing director John Kinney told Better Retailing that, although he couldn’t discuss specific supplier pricing and margins due to confidentiality, the firm was in “dialogue” with Mars over the issue of shared margin. He added: “Where a supplier has proposed a price increase, and we understand in the current climate this might be inevitable, we would not accept a reduction in shared margin. Both wholesalers and retailers are also facing cost increases in their business and cannot be expected to also absorb supplier costs.

“At a time when consumers are facing significant cost-of-living pressures, impulse products are at risk and now is when impulse suppliers need to back independent retail to protect their overall market share,” he said.

When asked to comment on the shrinkages, Coca-Cola Europacific Partners, Nichols and Mars Wrigley all acknowledged they were being hit by price pressures. They added that wholesalers and retailers were also free to set their own prices.

A Mars Wrigley UK spokesperson said: “At Mars we have been absorbing the rising costs of raw materials and operations for some time, but the growing pressures we are facing mean that more needs to be done. Increasing the cost of some of our PMPs is not a decision we take lightly, and we have put a number of options in place to best support and provide choice for our partners as we do this.”

A CCEP spokesperson added: “We recognise the importance of PMPs to independent retailers, accounting for more than 69% of total soft drink sales in convenience. And we know they are more important than ever in offering reassurance to shoppers who are spending carefully but who still want to enjoy their favourite brands.

“The industry has faced significantly increased costs in energy, packaging, ingredients and areas of supply chain for some time now due to external factors beyond its control. As a business we have taken steps to mitigate the impact of these cost pressures where possible. This includes ongoing efforts to maintain a fair margin on PMPs and ensuring retail customers can continue to make the most of the opportunities they can bring.

“The recommended prices on CCEP’s PMPs are intended only as a guide for retailers, and there are plain packs available as well.”

A Mondelez International spokesperson said that it invests heavily in the independent retail channel and “strives to add value through the entire supply chain through marketing activity, point of sale, category advice and its sales force.” They added: “Our customers, wholesalers and retailers, are free to set their own prices.”

Levi Roots manufacturer Nichols said: “The well-publicised effects of increasing costs across materials, ingredients and labour are being felt across the industry and, like others, has meant that we have had to consider price increases. Whilst we set certain prices, like the consumer facing PMP price, we can only provide a recommendation to our wholesale partners who set prices for their retailers at their own discretion.”

Britvic declined to comment.

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