UK's Premier Foods accused over 'pay and stay' practice
December 4, 2014 11:34 PM   Subscribe

Premier Foods, one of the UK's biggest manufacturers, has been asking its suppliers for payments to continue doing business with the firm.
posted by marienbad (20 comments total) 4 users marked this as a favorite
 
IANAcorporate douchebag, but I don't understand why, rather than demanding a £70,000 'voluntary investment' from their suppliers, they wouldn't just use the same threats to force them to renegotiate their prices in such a way as to make a £70,000 saving? Much more legal, no bad PR, and the supplier doesn't feel like they're working for the Mafia.
posted by forgetful snow at 12:01 AM on December 5, 2014 [7 favorites]


What, you mean just act like all the other supermarket chains?
posted by GallonOfAlan at 12:16 AM on December 5, 2014 [1 favorite]


GallonOfAlan: indeed - these types of fees are regular fare all over this industry.
posted by Captain Fetid at 2:20 AM on December 5, 2014


The explanation is probably tax related. If your suppliers discount the amount they charge you, that reduces your costs (which means you have less to offset against income). If they "invest" in your business that is not taxable income.
posted by Major Tom at 2:30 AM on December 5, 2014 [7 favorites]


rather than demanding a £70,000 'voluntary investment' from their suppliers, they wouldn't just use the same threats to force them to renegotiate their prices in such a way as to make a £70,000 saving?

Isn't this what walmart does? they go "your product needs to hit this price point wholesale or we'll cut off all business with you" and do exactly that.

i'm confused too, wasn't that an accepted business practice? shit, i think even costco does it. And they aren't like, the star wars-esque empire of evil and pay people real wages and shit.
posted by emptythought at 3:24 AM on December 5, 2014 [1 favorite]


i think even costco does it. And they aren't like, the star wars-esque empire of evil and pay people real wages and shit.

Quite the opposite - Coctco treats their staff like people.
posted by Smart Dalek at 3:40 AM on December 5, 2014


Isn't this what walmart does?

in principle, Walmart is going to make the same profit per unit and grow on volume. nothing about this suggests they are trying to grow by reducing prices. rather they are consolidating suppliers and asking them to pay to get a chance at a bigger slice of the pie... which is blatantly anti competitive.

but in practice Walmart are slimy fucks who have built an empire on extortion and theft from everyone associated with them. but that's business, right?
posted by ennui.bz at 3:44 AM on December 5, 2014 [1 favorite]


"Then the credit crisis struck and shares in Premier collapsed from £30 in 2007 to just over 50p yesterday after a painful restructuring and an axing of the dividend. Despite management’s protestations it has been a journey of value destruction for investors. ..the debt pile remains. At the end of March, net debt was £513m, against a stock market value of £416m and a net asset value of £18m on the balance sheet. The pension fund deficit has also ballooned to £603m from £467m a year earlier" ~ Telegraph June 2014

If interest rates ever rise this company is dead.
posted by Lanark at 4:19 AM on December 5, 2014 [3 favorites]


If interest rates ever rise this company is dead.
posted by Sportswriters at 5:05 AM on December 5, 2014 [1 favorite]


I don't understand why, rather than demanding a £70,000 'voluntary investment' from their suppliers, they wouldn't just use the same threats to force them to renegotiate their prices

When people jump through extra hoops to reach a result that could be reached in simpler fashion, a lot of times there's some sort of regulatory reason. I'm certainly no UK legal expert, but it does look like negotiating for discounts could be problematic under applicable anti-competition laws.
posted by jpe at 5:15 AM on December 5, 2014 [2 favorites]


So the "investment" is really a bailout.
posted by urbanwhaleshark at 5:17 AM on December 5, 2014


I always knew there was something dodgy about Mr Kipling.
posted by oliverburkeman at 5:22 AM on December 5, 2014 [1 favorite]


re: tax: "investment" seems to be just corporate jargon metaphor to make a flat fee more palatable. The consideration for the fee is that the supplier gets to stay on the supplier list, which Premier says they're winnowing down so they can have fewer supplier relationships.

So it sounds a bit like an entrance fee to get into the grocery supply chain version of The Bachelor.
posted by jpe at 5:37 AM on December 5, 2014 [1 favorite]


i think even costco does it. And they aren't like, the star wars-esque empire of evil and pay people real wages and shit.

Quite the opposite - Coctco treats their staff like people.
posted by Smart Dalek at 3:40 AM


Costco has found one tiny wedge they've been able to spin perception around that resonates well with those of us that wouldn't patronize the Walton clan. Trust me, they're just as slimy as the rest in every other regard. Maybe worse in dealing with suppliers.
posted by Keith Talent at 7:42 AM on December 5, 2014 [2 favorites]


I'm certainly no UK legal expert, but it does look like negotiating for discounts could be problematic under applicable anti-competition laws.

I strongly doubt that it's illegal for businesses to negotiate prices with their suppliers. If a vendor charges a price that is too high for a retailer to sell at a profit, it would be completely insane for the retailer to be prohibited from walking away from the deal.

That being said, things start getting problematic when buyers and sellers start colluding to drive prices up or down. If a supplier is charging radically different prices to different customers, I could see where that might start becoming illegal.

Similarly, Wal-Mart had a track record for strong-arming its suppliers into selling products at a considerable loss (allowing Wal-Mart to achieve retail dominance in one category, helping the supplier to drive its competitors out of business, and eventually allowing both to jack up their prices once the competition was extinguished).
posted by schmod at 7:57 AM on December 5, 2014


If interest rates rise the pension liability shrinks a lot.
posted by JPD at 8:12 AM on December 5, 2014


this company is dead.

I'm not certain what the purpose of Premier Foods is, though. Its portfolio of brands changes too fast for this UK grocery supply chain nerd to keep up with, and unlike e.g. United Biscuits, there's no core product they're focused on. I'm not sure how they connect brands and factories, but it all looks like an 80s style conglomerate to me: not something that is needed in a developed world economy.
posted by ambrosen at 10:31 AM on December 5, 2014 [1 favorite]


Premier Foods said it was confident the scheme did not break any rules under competition law.

I really detest how corporate thinking has degraded to just stating "Clearly, if it isn't ILLEGAL then it MUST BE OK!" Whatever you feel about corporate personhood, it's clear that if companies WERE people they'd mainly be sociopaths.
posted by caution live frogs at 11:24 AM on December 5, 2014 [4 favorites]


I work for a charity. Mr Kipling sent my office some cakes the other day, after a colleague replied to something on their Twitter feed asking about who deserved a cake today or something. At the time I thought this was just a way for them to get a tiny bit of very cheap publicity, now I'm worried that, unless we keep tweeting them, Premier will send the boys in to do some damage.
posted by howfar at 4:01 PM on December 5, 2014


Costco has found one tiny wedge they've been able to spin perception around that resonates well with those of us that wouldn't patronize the Walton clan.

I think treating their employees fairly and paying them well enough that they don't need to collect food stamps is more than a "tiny wedge" - it's a huge improvement over Walmart. And I really doubt that they do it just to trick liberals into shopping there - keeping experienced staff rather than dealing with constant staff turnover probably has its benefits.
posted by Umami Dearest at 3:25 AM on December 6, 2014


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