Unreasonable behaviour by supermarkets is increasingly sending small and medium-sized food suppliers out of business, a leading business recovery specialist has claimed.
Duncan Swift, head of the food and agribusiness recovery Group at business adviser Grant Thornton, said: “In the last 18 months, we have been getting busier and busier dealing with distressed food companies.
“When you look at the key drivers of financial distress, it’s nearly always because multiple retailers have materially changed the terms of business on an unreasonable basis.”
His comments follow research from Surrey University highlighting the detrimental impact of consolidation on small retailers, suppliers and consumers, which will add weight to calls for government intervention to curb the power
of the leading supermarkets. Swift said: “We are hearing horror stories now on an almost daily basis. From being delisted without notice, sudden changes in payment terms, retrospective reductions on invoice prices for contributions and returns that have not been agreed, to a supplier’s npd spec being sent out to its competitors by buyers.”
While the code of practice was worthless in its current form, it was possible to provide suppliers with more financial security by setting out in black and white minimum contract terms, he claimed.
These should include 30 days’ notice of contract termination and payments being made to suppliers within 30 days without deduction. Any other payment terms would be valid only if agreed in writing prior to supply having been made.
Finally, there should be no retrospective reductions or discounts on payments to suppliers unless they have been agreed in writing beforehand, he said. “Suppliers are constantly trying to recover money from supermarkets, and a lot never comes back.”
The OFT is believed to be planning a joint statement at the end of the month outlining the results of the audit of the code of practice and responding to calls for a market review.
Elaine Watson & Fiona McLelland
Duncan Swift, head of the food and agribusiness recovery Group at business adviser Grant Thornton, said: “In the last 18 months, we have been getting busier and busier dealing with distressed food companies.
“When you look at the key drivers of financial distress, it’s nearly always because multiple retailers have materially changed the terms of business on an unreasonable basis.”
His comments follow research from Surrey University highlighting the detrimental impact of consolidation on small retailers, suppliers and consumers, which will add weight to calls for government intervention to curb the power
of the leading supermarkets. Swift said: “We are hearing horror stories now on an almost daily basis. From being delisted without notice, sudden changes in payment terms, retrospective reductions on invoice prices for contributions and returns that have not been agreed, to a supplier’s npd spec being sent out to its competitors by buyers.”
While the code of practice was worthless in its current form, it was possible to provide suppliers with more financial security by setting out in black and white minimum contract terms, he claimed.
These should include 30 days’ notice of contract termination and payments being made to suppliers within 30 days without deduction. Any other payment terms would be valid only if agreed in writing prior to supply having been made.
Finally, there should be no retrospective reductions or discounts on payments to suppliers unless they have been agreed in writing beforehand, he said. “Suppliers are constantly trying to recover money from supermarkets, and a lot never comes back.”
The OFT is believed to be planning a joint statement at the end of the month outlining the results of the audit of the code of practice and responding to calls for a market review.
Elaine Watson & Fiona McLelland
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