Holland & Barrett suppliers are outraged at what they describe as “unacceptable” changes to their payment terms, which could see them effectively forced to pay several thousands more to list with the high street retailer.
On Friday, H&B emailed a significant number of suppliers notifying them it planned to implement new changes to their individual commercial terms. It includes in some cases a near doubling of days in which invoices are paid, as well as substantial four-figure hikes in the cost of receiving sales data from stores.
The retailer would also implement a blanket quarterly rebate for each supplier equivalent to 2% of the cost of goods stocked by H&B, according to the emails, multiple separate copies of which have been seen by The Grocer.
Several medium and small suppliers contacted by The Grocer criticised the “out of the blue” timing of the “harsh” new terms, which come into effect between April and early May.
In the emails, Holland & Barrett said the proposed changes would help it mitigate the impact of what have been “significant cost price increases” over the last two years, as retail prices “come under pressure” and material costs begin to fall.
“After reviewing your current agreement, we have found that you are not on our standard payment terms, and do not purchase what we consider to be the minimum acceptable EPoS data package from us,” the contacted suppliers were told. H&B added it considered access to EPoS data an “essential” part of working with the retailer.
The letters went on to outline changes to individual payment terms, which in some cases saw the total days in which invoices would be paid double. Companies were then quoted an individual price for the cost of an EPoS package, which is substantially larger than previous costs they’ve paid.
H&B would also be implementing an ongoing “standard 2% cost of goods rebate” which would be “invoiced quarterly” and cover the previous three-month periods. The Grocer understands that the emails were sent to around 13% of Holland & Barrett’s supply base.
‘No notice’ from buyers
One small supplier source described the changes as “ridiculous” and “totally unacceptable”.
“We are a small business, we are not going to dive down into EPoS data store to store, they need to offer something in return,” she said, adding that three months’ notice was not enough to be factored into a business’s cost forecast, which is worked out annually for many.
The impression among some suppliers is that the change was being managed centrally, as there had been no “heads up” from H&B buyers.
“It’s mental,” said another supplier source. “It would be carnage if we tried to do a price increase without first giving the heads up to our contacts.”
At least two suppliers who spoke to The Grocer had replied to the email refusing the terms outright. The fact that H&B had responded saying it would address their email soon while it dealt with a backlog of requests “says everything” about sentiment among the supply base, one of the pair said.
“Like all businesses we continually review the economic environment to make sure we can continue to achieve market growth and momentum in partnership with our suppliers,” said Guy Farmer, Holland & Barrett UK commercial director. “We can confirm that Holland & Barrett is continuing its programme of investment for growth, and in strengthening our supplier relationships.
“This includes the continued standardisation of our payment terms and better access to our data through our new vendor portal. We believe these changes are necessary to help support mutual growth in the changing market conditions ahead, and we’re speaking individually with our suppliers to help them understand the changes, and the growth opportunities for us in the future.
“If individual suppliers have questions we would encourage them to get in touch so we can support them through these changes,” Farmer added.
Emails undo ‘years’ of progress improving supplier relationships
The fallout is the latest in a long line of disputes between Holland & Barrett and its supply base over recent years, relating to late payments and accusations of poor payment practices.
Despite its size as one of the UK’s largest high street retailers, Holland & Barrett does not fall under the scope of GSCOP as it does not make £1bn in turnover from food sales.
The retailer apologised to suppliers following the completion of a £700m debt buyback deal by owner LetterOne in November 2022, promising to improve relationships moving forward.
Chief executive Alex Dower echoed that sentiment following the relaunch of Holland & Barrett’s entire food category in September 2023, insisting the company was investing “much more resource” into the way it communicated with suppliers, including the establishment of a new supplier portal.
Thea Alexander, CEO at YF, said buying teams had done a “fantastic job” in shifting perception over recent years, and the retailer was becoming seen as a “real partner to innovative brands”.
“Letters like those received today by several suppliers risk undoing those years of excellent work in supplier brand-building. What happens next in commercial discussions will determine the real impact on long-term reputation among suppliers,” she said.
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