Blog: Brexit forcing grocers to stock enemy product – FreightWaves

This is an excerpt from Monday’s Point of Sale retail supply chain newsletter.

The UK grocery supermarket sector was once highly oligopolistic, but in recent years, European brands have expanded in the UK and have created a much fiercer competitive landscape. There are 4 primary British supermarket chains dubbed ‘The Big Four’: Tesco, Sainsbury’s, ASDA, and Morrison’s. The new challengers include Aldi and Lidl of Germany, and SPAR of the Netherlands. 

The long and messy trade disputes stemming from Brexit are forcing supermarkets in Northern Ireland (NI) to conduct highly unusual business practices to keep shelves stocked. On December 31, England, Scotland and Wales left the EU’s single market for goods but NI did not. This created a new trade and regulatory border between NI and the rest of the UK. 

The new ‘Irish Sea border’ means that food products entering NI from England must undergo a range of time-consuming new processes such as the creation of export health certificates and checks at new border posts. In response, supermarkets have been looking at ways to source more products locally in NI and the Republic of Ireland. 

For Sainsbury’s, that has included indirectly partnering with the enemy, Netherlands-based SPAR. To ensure shelves remained stocked, Sainsbury’s entered into a contract with Henderson Group, one of Northern Ireland’s biggest food wholesalers which sells to retailers and caterers. But, the retailers Henderson stocks are almost exclusively a network of SPAR stores across NI. 

While the agreement is temporary and only in place until Sainsbury’s can work out long-term supplier agreements, the move is unprecedented. When the Sainsbury’s management team was pressed on the unusual nature of stocking rival’s goods, the company insisted that it was “not that unusual”. It said that “for example, elsewhere in the UK we have wholesale agreements which mean Sainsbury’s branded products are stocked by Simply Fresh, Dobbies and WHSmith”. 

However, as the News Letter pointed out, Dobbies is a garden centre, WHSmith is a newsagent, and the small high-end grocery store Simply Fresh has no shops in NI. Management could not point to any precedent for a supermarket stocking a rival supermarket’s branded produce. 

This is the British equivalent of Walmart carrying Target-branded SKUs, or Trader Joe’s stocking Publix products. The anecdote demonstrates a couple of things: how disruptive Brexit is; how even the most extreme supplier flexibility has to be part of any retail contingency plan; and why it’s worth it to sacrifice a little bit of margin on rivals’ SKUs in order to keep shelves stocked, preserve foot traffic, and get consumers in the door (where they can buy lots of other things too).

Want more retail supply chain news and insights? Try Point of Sale.

Supply disruptions stemming from Brexit has forced British supermarket chain Sainsbury's to partner with one of its biggest rivals, Dutch-born SPAR, to avoid empty shelves in Northern Ireland.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s