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Safeway faces cash demand probe
Some food lines could receive extra promotion for money |
Supermarket giant Safeway could face an inquiry over plans to demand thousands of pounds from suppliers for extra promotion of their goods.
The National Farmers' Union is reporting the supermarket chain to watchdog the Competition Commission.
Safeway has asked more than 300 suppliers to pay £20,000 for each product line involved in the new scheme. For some food manufacturers, the cost could amount to more than £100,000.
Safeway's promotion involves guaranteeing to shoppers that the 1,000 top-selling brands will be available 24 hours a day.
The NFU, which has held an emergency meeting with Safeway bosses, says the charges are unacceptable and put small producers at a disadvantage.
'Contributions, please'
Union chiefs say suppliers of four types of product, for example, are being asked to donate £80,000.
Suppliers say the system would be unfair |
UK supermarkets and suppliers are in constant negotiations behind the scenes over charges and payments for certain special offers are not unusual.
But in this case, suppliers are angry because they say store chiefs should be routinely ensuring availability.
In a letter to suppliers last week, Safeway wrote: "To take part in the programme, we request a contribution from you per product line of £20,000 which will cover only part of our extra costs."
It adds: "We look forward to you joining us in this campaign, and anticipating a favourable response, we will take the liberty of sending you an invoice on Friday of this week."
The Competition Commission says the NFU's information will be incorporated within its current inquiry into supermarkets.
'Subsidies' protest
Safeway spokesman Kevin Hawkins told the BBC they were trying to make sure all their top-selling lines would be available all the time.
It involves investment in the supply chain of £50m-£60m, he said, and they were asking suppliers for contributions.
He said suppliers would benefit as sales would rise by 15% and some had already lauded the plan.
Mr Hawkins said: "The only way we can all do better ... is to try to generate more sales and we can do that if we try and improve our availability. That's what we're trying to do and we hope our suppliers will come with us because they stand to gain."
But Helen Lo of the NFU said it was unreasonable as profit margins would need to rise to 11% for the scheme to work. At the moment, farmers were struggling to make any profit, she said.
"Why should farmers and growers effectively subsidise the rest of the supply chain?"
Mr Hawkins said suppliers not joining the scheme would not suffer discrimination, but those who were in the scheme would enjoy the advantages of the promotion
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23 Jul 99 | The Company File |
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