The rise in insolvencies among food suppliers is in stark contrast to the 8% fall in liquidations in the economy as a whole over the same period.
The supermarkets are going through a price war. UK-based chains are trying to compete on price with discounters such as Aldi and Lidl, but without reducing their profit margins (2), which are much higher than those of the discount chains.
As a result, they are putting food producers under more pressure, applying price deductions and cancellations at short notice.
A major source of cash flow problems for food suppliers is highlighting contracts. Under these agreements, suppliers basically have to pay supermarkets just for having their products on display in the stores.
To address the problem of market power, the UK government has created the office of grocery code adjudicator (3). This official can fine retailers abusing their position. But the adjudicator’s remit (4) is limited and excludes the original price negotiation that forms the basis of a contract.
https://www.theguardian.com/business/2014/nov/24/food-producers-insolvency-uk-supermarkets
Questions
- According to the article, is the growing number of insolvencies among the food producers in line with the overall trend in the UK economy?
- Explain the concept of ‘price war’ (3rd paragraph).
- The article uses a number of words to designate the process of going out of business. Find them.
- What is the one difference between UK-based supermarkets and discounters like Aldi mentioned in the article?
- What are ‘highlighting contracts’ (5th paragraph)?
- Has the UK government reacted to the situation in the food production sector?
- Do you think that the situation described in the article in any way resembles that in the Czech food sector?
- When going shopping, do you have a preferred chain or store?
- What are your main criteria for choosing between products?
Vocabulary
wholesale (1) – relating to the business of selling goods in large quantities at low prices to other businesses, rather than to the general public [the antonym of retail, which relates to selling goods in small quantities to the general public]
margin (2) – the difference between what it costs a business to buy or produce something and what they sell it for
adjudicator (3) – someone who officially decides who is right in a disagreement and decides what should be done
remit (4) – the area of authority of a person or group
You can find additional explanation and more examples to help you understand and use English words and phrases at https://dictionary.reference.com, https://dictionary.cambridge.org/, https://www.merriam-webster.com/ or https://www.ldoceonline.com/
