Premier Foods accused of demanding “investment payments” from suppliers

Premier Foods, one of the UK's biggest manufacturers, has been accused of demanding payments from its suppliers to continue doing business with them.

BBC’s Newsnight reports that Premier Foods said it was confident the scheme did not break any rules under competition law, but the UK government said it was "concerned by recent reports".

The company, which owns brands like Mr Kipling, Ambrosia, Bisto and Oxo, demanded the payments from suppliers across the UK.

Newsnight has seen a letter sent by chief executive Gavin Darby, dated 18 November.

He wrote: “We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas.”

“We will now require you to make an investment payment to support our growth.

“I understand that this approach may lead to some questions.

“However, it is important that we take the right steps now to support our future growth.”

But when a supplier raised questions in an email about the annual payments, another member of Premier's staff replied.

“We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list.”

Liesl Smith, from the Federation of Small Businesses, said: "This is the first time that we have ever seen anything so blatant… in this very direct way before.

“We think it is unjust, it is not competitive and it is not helping the supply chain.

“It's not just going to affect the business owners, it will affect staff as well.”

Premier Foods told Newsnight: “We launched our 'invest for growth' programme in July last year as part of a broader initiative to reduce complexity in support of plans to help turnaround the business.

“This included a commitment to halve the number of our suppliers and develop more strategic partnerships focused on mutual growth.

“The programme requires our suppliers to make an annual investment to help fund our growth plans.

“In return, our suppliers benefit from opportunities to secure a larger slice of our current business.

“They also stand to gain as our business grows in the future.”

It added: “In the current challenging environment, the support of all of our suppliers is crucial.

“We have had a positive response from many who are actively engaging in building a new partnership with us, including many small companies.”

Newsnight understands many suppliers have paid a total in the low millions so far.

Competition law states that in some cases, pay to stay can be against the law.

Premier Foods is confident its scheme is within the rules.


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