Morrisons challenged over supplier payment demand

By Nicholas Robinson contact

- Last updated on GMT

Morrisons has sent an email to suppliers asking for money
Morrisons has sent an email to suppliers asking for money

Related tags: Morrisons, Asda, Tesco

Morrisons has been challenged by the UK supermarket watchdog to explain why it is demanding impromptu payments from its suppliers.

The retailer and manufacturer, which boasted the largest sales growth of the big four retailers last month, asked its suppliers for money by email to fund recent investments.

The email to suppliers, which was first seen by The Guardian,​ said: “With half year approaching the business is reviewing the performance of each of its suppliers … ​[Within Morrisons stores] there has been yet more price investment on key essential lines and we have 6,700 more colleagues in stores supporting service.”

“All of this work has come at a significant cost to the business. We need your support to continue and build on this performance but not to the detriment of Morrisons’profitability. To this end Morrisons’ expectation of ​[supplier name] is to support Morrisons with a lump sum payment of ​[£XXXX] payable by 17 July 2015.”

Morrisons apologised

What’s next for Morrisons?

Morrisons’ impromptu payment demands come just weeks before the firm has to report its first half results to the City. Analysts have already predicted a 10% drop in full-year earnings.

Morrisons apologised to its suppliers for sending the demand by email and said time constraints left it with few other options.

The retailer refused to comment specifically on the email without knowing more about it, but said: “In some cases we do have agreements with some of our suppliers that enable us to occasionally ask for support to enable us to invest in our business to the mutual benefit of Morrisons and our suppliers.”

A spokeswoman for the Groceries Code Adjudicator [GCA] Christine Tacon said the watchdog was aware of Morrisons’ letter to its suppliers and had written to Britain’s fourth largest retailer for an explanation.

“At this stage, the GCA has no evidence that Wm Morrison has breached the ​[Groceries Supply Code of Practice],” the spokeswoman said.

However, if Morrisons was found to be in breach of the Code, it could become the second UK supermarket to be probed after Tacon launched an investigation into Tesco in February.

Tacon announced the investigation

Tacon announced the investigation into Britain’s biggest retailer​ after evidence of suspected breaches to the Code came from three main sources.

At the time, Tacon said she had “reasonable suspicion” ​that the supermarket had breached the Code.

Meanwhile Premier Foods boss Gavin Darby found himself heavily criticised last year​ after the manufacturer’s policy of demanding suppliers to make investments in the business was revealed.

The highly controversial pay-to-stay plan was described by one supplier as like having “a gun held against the head”.

Darby backtracked on the ‘Invest for Growth’ programme and, in an exclusive interview with FoodManufacture.co.uk’s​ sister title Food Manufacture, ​explained why it had gone wrong.

Would you pay?

“With half year approaching the business is reviewing the performance of each of its suppliers … ​[Within Morrisons stores] there has been yet more price investment on key essential lines and we have 6,700 more colleagues in stores supporting service.”

“All of this work has come at a significant cost to the business. We need your support to continue and build on this performance but not to the detriment of Morrisons’profitability. To this end Morrisons’ expectation of ​[supplier name] is to support Morrisons with a lump sum payment of ​[£XXXX] payable by 17 July 2015.”

Related topics: Ambient foods

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