An email from a reader – Foodstuffs taxing suppliers

via the tipline, a reader emails me:

You’ll see in the news today that Foodstuffs Wellington who?own Pak’n Save and New World in Wellington are slamming NZ suppliers?with a 3% rebate.

Well that’s just the start! I hear ?from someone?working there that they’ve just opened a product buying centre in?China too. Does that mean we’re going to see even more Chinese?products on our supermarket shelves?

I thought a NZ owned supermarket group would support local suppliers -?obviously not!!

I’m going to shop at Aussie owned Countdown.

It certainly sounds like Foodstuffs is employing bullyboy tactics against suppliers…and when you have a duopoly I guess they can.

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.

I would?have?thought the 3% “promotions charge” was in fact a secret commission to Foodstuffs in order to prefer suppliers who coughed it…I say that because what are the implications for a supplier if they don’t pay it vs a supplier that does pay.

Imagine say a supplier of a readily?available?commodity?like say honey…or a ubiquitous product like salt or something with multiple suppliers didn’t pay the “promotions charge”…and another supplier out there did, and as a result Foodstuffs changed the core component of their Budget and Pams house brands to the supplier that paid the “promotions charge” forsaking the previous supplier then a case could easily be made that it was in fact a secret commission in order to secure the business. A quick read of the Secret Commissions Act 1910 would seem to support this.

Perhaps this is something the Commerce Commission might like to have a look at?