The head of one of the UK’s largest mushroom packers, Greyfriars, has threatened to launch scathing public attacks on Tesco unless it abandons its policy on overriders.
C John Smith said he is planning to use articles in the press to embarrass Tesco into action when its financial results are announced on April 12.
Meanwhile, the OFT said it was still “considering” a complaint made by Smith to the OFT about Tesco’s trading practices, which means it was not taken into account when the OFT published its report into the supermarkets code of practice.
Smith’s fight with Tesco goes back to 2004 when Greyfriars was given three months’ notice that its mushroom supply
contract with the retailer was to end. Greyfriars subsequently picked up extra business from Morrisons, at which point Smith decided he had nothing to lose by revealing alleged practices by Tesco that he claims are in breach of the code. Central to his argument is the claim that Greyfriars was forced to pay overriders - rebates designed to encourage retailers to take more volumes of a product - even though volumes of mushrooms taken by Tesco did not increase. Under the code retailers may only demand lump sum payments from suppliers to fund promotions or to offset the risk of stocking new products. Smith said none of these conditions applied when Greyfriars was supplying mushrooms to Tesco.
Smith wrote to Tesco boss Sir Terry Leahy on December 30 to complain about the treatment meted out to Greyfriars. He said his claims were dismissed by the retailer’s legal team.
He also alleged that Tesco’s accumulated funds derived from overriders were worth up to £700m a year.
Tesco rejected Smith’s claims. “We call them discounts rather than overriders. Our processes are totally transparent,” said a spokeswoman.
Richard Clarke