Premier Foods squeezes its suppliers

Articles in the press over the past month have reported that Premier Foods planned to ditch half of its 3,000 suppliers and wanted them to contribute money as a condition of continuing to do business with the company.

The reports followed contacts made earlier to Food Manufacture from some Premier suppliers, which reported that they had been asked for money in order to be listed in store.

'Very disgruntled' ​

One supplier, that did not wish to be named, expressed particular outrage at Premier's move. He said: "Needless to say, I am a very disgruntled supplier the arrogance of this company makes them think we are so desperate for their business that we will give them money! They are working very hard to pull together a complete strategy in getting money from their suppliers.​

"As a supplier, I will not be contributing towards a company that doesn't appear to be going anywhere."​

He added: "This drive to get money is apparently to be used to invest in their brands for the future. The cynic in me firmly believes it is to bail them out yet again."​

According to reports in our sister magazine The Grocer, Premier Foods chief executive Gavin Darby had written to suppliers outlining the reasons behind the move to reduce the number of its suppliers by half by the end of 2014. Darby said Premier was seeking "an investment payment"​ by suppliers from the beginning of August. The sums mentioned ranged from £10,000 to £15,000 for smaller suppliers to much larger sums for larger food and drink manufacturers.

'Aggressive' ​

Last year suppliers to Britain's fourth largest supermarket Morrisons contacted Food Manufacture to complain about the supermarket's demands for price reductions from suppliers to enable them to remain listed within its stores. The multiple was accused of using "aggressive"​ and heavy- handed tactics in its attempts to force around 200 suppliers to accept price cuts of up to £500,000 each and impose improved buying terms.

Since the new Groceries Code Adjudicator Christine Tacon's role became effective on June 25, any similar demands for revised contract terms by big retailers could well instigate an investigation by her office. However, it is unclear whether her remit would extend to similar demands by big food manufacturers from their suppliers.

Meanwhile, Premier Foods has struck a licensing agreement with 2 Sisters Food Group (2SFG). Under the terms of the deal, 2SFG will undertake the production, distribution, sales and marketing of Premier's Hovis Breakfast Bakes range of breakfast biscuits.

The new agreement will run for an initial period of five years from August 1 2013 and marks an important step for 2SFG as it looks to further diversify into new food categories.