I blogged a couple of days ago about Premier Foods ‘pay to stay’ policy, wherein suppliers are “asked to make an annual voluntary investment to help fund [Premier’s] growth plans”. What the company does not emphasise is that any supplier who does not make such a “voluntary” payment is likely to be delisted i.e. no longer be a supplier to the company. It seems that Premier are standing by this policy and see nothing wrong with it, as this blog explains. Their basic argument is that by funding growth, the suppliers own businesses will grow.
There are so many things wrong with this, let me try to tease them out…
- If a supplier wishes to grow their business they should be free to invest their capital in whatever strategy they want, not be obliged to invest in their customer’s growth strategy, over which they have little or no control.
- A supplier may sell a very high proportion of their output to Premier Foods, especially since Premier want to rationalise their supply base, and therefore order more from fewer suppliers. Losing the contract could therefore bankrupt the supplier, leaving them with little option but to agree to Premier’s terms.
- Premier have a supply contract with their suppliers. If the terms of this contract stipulated that suppliers would be requested to make payments towards the growth of Premier, then the supplier goes into the deal aware of this stipulation. To apply this AFTER the contract has been agreed is unacceptable.
- Other operators, notably supermarkets, have accepted that this practice is dubious and have changed their policies. Why is Premier Foods any different?
It seems that many people are outraged by this and already a social media campaign has been started to boycott Premier Food products, such as Ambrosia, Batchelors Bisto, Loyd Grossman, Mr Kipling, OXO and Sharwood’s.