A large national grocery supplier has called Foodstuffs Wellington Co-operative “the problem child” of New Zealand's supermarket chains.

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 announcing it would levy a 3 per cent “promotions rebate” from all products sold in its stores.

The letter was received by suppliers on August 31 informing them the rebate would take effect from October 1 - barely a one month turnaround compared with the six-week warning supermarkets require from suppliers on simple price-change requests.

The supplier, speaking on condition of anonymity, said the extra cost of the rebate was a “profit grab” at suppliers' expense and one that could send some smaller businesses to the wall.

He believed that if suppliers granted Foodstuffs Wellington the rebate then other supermarkets would follow suit.

“You can bet your bottom dollar [Foodstuffs' competitor] Countdown knows about this already and they're going to come and say, ‘If you give them that then we want better terms of trade as well'.

“In the end we all will have to pay an additional 3 per cent over to retailers, which they can either pocket or put into price, but it costs all of the suppliers.”

The supplier said supermarkets often played hardball with suppliers because there were only two main competitors, Foodstuffs and Progressive Enterprises, who control 95 per cent of the domestic market.

Most suppliers won't speak out publicly for fear of retaliation from the supermarket chains.

However, he said it was unusual that one area, such as Foodstuffs Wellington, would “go it alone”.

“The concern is for smaller suppliers; they're going to look at this and say, ‘OK, well luckily it's only ‘X' part of my business, if I've got to give away 3 per cent it's going to be tough but I can't afford not to do it'.

Foodstuffs Wellington said the rebate will go towards more coordinated in-store and mail-driven promotional efforts, and reflects the level of promotional value already negotiated with individual suppliers.

Foodstuffs Wellington also denied having backed down on suppliers of home brands such as Pams and Budget products being subject to the rebate, saying it had never intended they would be.

However, Food & Grocery Council chief executive Katherine Rich said the company was trying to “rewrite history” because she had clearly discussed the home brands issue with Foodstuffs general manager of products Edwin Geary.

- © Fairfax NZ News