Tesco PLC (LSE:TSCO) supplier Avara foods has blamed inflationary pressures for the proposed closure of a packing factory in Wales.
Avara, which is among the UK’s largest poultry suppliers, said it may shut the Abergavenny factory in autumn this year due to “significant inflationary pressure” since the pandemic.
The pressure was most felt in the costs of fuel, commodities and labour, it said.
Jointly owned by US family-owned giant Cargill and UK's Faccenda Foods, Avara reported a £16mln loss for the year to May 2022, according to Companies House filings, despite revenues of £1.26bn.
Closure of the factory would be part of Avara’s effort to “reengineer” its turkey business, to boost efficiency, but could impact around 400 jobs.
“This difficult decision has not been taken lightly and in no way reflects on hard-working colleagues,” Avara continued in a statement.
“In the coming days we will begin a collective consultation process with the individuals that are affected by this proposal.”
Avara’s push for greater efficiency comes amid a struggle between supermarkets and suppliers over pricing.
Tesco has faced accusations of profiteering on the back of high inflation, which fell monthly to 8.7% in April but only by a mere 0.1% among food and non-alcoholic beverage products, remaining at 19% compared to last year.
Outgoing chairman John Allan argued the supermarket was governed by suppliers, claiming in April: "By and large, we have to accept the price increases that [they] provide.”
Suppliers have argued the other side though, with Retail Mind director Ged Futter explaining last month that the supermarket had been pushing suppliers for lower prices.
As inflation eases, “the pressure on suppliers to decrease prices is going to come thick and fast,” he said.