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Originally Posted by Paul
Unfortunately it's the same in all supply industries, I worked for a company that manufactured components for a number of car companys. Each year they demanded a 10% reduction in costs per component and it basically led us to the point where we would have to continue developing new parts as the old established components were actually selling at a loss to companies like Ford, Honda, Rover etc. Without developing new components we wouldn't have had any parts that we could sell at a profit  |
the saving grace for us, is that we have our own brands, as well as manufacturing 'own label' for retailers. There is some very complicated negotiation involved in gaining the shelf space for our brand - largely centred around contributing to promotions for their own label products in the same category.
Obviously we have competition from other manufacturers in our sector, so as you say, Paul, we continually have to innovate in order to maintain our market share & margin.
Supermarket price fixing also has effects on employment patterns - we have laid people off recently as we now import a major raw material in a semi-processed state, rather than processing it ourselves - this is only possible because the processing is done in China. So we ship a product half way round the world & back again, to make a saving on labour costs, which enables us to meet the price point - but at the expense of local employment.