Supermarket reconsiders extra charge

04:36, Sep 14 2012

Grocery suppliers say supermarket giant Foodstuffs has partly backed down on its decision to hit suppliers with a 3 per cent promotions charge on products sold in its supermarkets.

However the retailer claims there's been no backdown.

Foodstuffs Wellington - which has the Pak'n Save, New World and Four Square brands throughout the lower North Island - sent letters to all its suppliers in recent weeks informing them it would start charging the ''promotions rebate'' from October 1 this year.

The Food & Grocery Council [FGC] said Foodstuffs Wellington has agreed to delay implementation of the rebate for homebrand products, which are Foodstuffs' own brands such as Pams and Budget.

Suppliers have never had any say in promotional activity for such brands, and in fact are often faced with a situation where a product they supply for use in a Pams or Budget product is actively competing with their own branded product on supermarket shelves, FGC chief executive Katherine Rich said.

Suppliers should not be expected to foot the bill for promoting such products, Rich said.


However Foodstuffs Wellington said in a statement that it had never intended that Homebrands would be subject to the charge, because most of them have their own individual contract terms.

The supermarket chain said it had "clarified this aspect with suppliers who were unsure".

Rich said Foodstuffs was "rewriting history", and this afternoon's statement contradicted her discussions with Foodstuffs Wellington's general manager of Product Edwin Gear on Wednesday, she said.

Homebrands had been included in the initial proposal and she had relayed that information to FGC members, but she was now happy that Foodstuffs had backed down.

"Making a deduction for those products looked like a cash grab, so thankfully Foodstuffs has seen the light and agreed to delay the implementation so that those issues can be factored into the next round of discussions between suppliers and Foodstuffs."

Foodstuffs Wellington said this afternoon that the promotions rebate would not increase suppliers' costs.

"We are simply changing the existing promotions model to ensure it is more effective for both ourselves and our suppliers, with the end result being a better shopping experience for our customers," said Foodstuffs spokeswoman Antoinette Shallue.

But Rich said the rebate would effectively cost suppliers more while lessening control over how their products were promoted in-store.

The chain's two other regional co-operatives, which are run separately in Auckland and the South Island, have not so far followed Wellington's move.

Rich said Foodstuffs had also agreed to delay the rebate on "indented goods" - bulk items such as rice and olive oil which have been purchased by suppliers and are already "on their way" to supermarkets from overseas import destinations.

The blanket rebate had "surprised and shocked" suppliers, particularly the deductions on home brand products, she said.

Earlier Shallue said the company simply planned to replace the charges suppliers already pay for promotional activities, including advertising space in the mailers, media advertisements, special in-store promotions and a host of other marketing support activities.

"The 3 per cent rebate of invoice is in line with what is already being paid," she said.

However Rich believed the move was motivated primarily by profit and was more than just a "slight change or a levy swap".

"What's different here is that the system is being moved from one where suppliers agree to promotions and to part with the cash, to a system where there isn't the same amount of discussion and the amount is just deducted across the board.

Former Green Party MP and Wellington City councillor Sue Kedgley, a campaigner for safe and healthy food, learned of the rebate from a supplier who didn't want to be identified for fear of retaliation. She said the rebate, which was effectively a 3 per cent margin cut to suppliers, showed the power supermarkets have here due to the fact just two big chains control 95 per cent of the market.