Safeway denies supplier squeeze
Supermarket defends negotiations on rebates
February 17 2003
Supermarket chain Safeway has defended its year-end negotiations with suppliers over rebates.
A letter from an unnamed supplier to trade magazine The Grocer last week claimed the supermarket chain was asking for higher levels of year-end payments that normal. The implication was that the supermarket operator is trying to boost its figures as potential buyers examine the business before launching an offer.
The letter said: “Safeway is certainly a focused business on threatening its suppliers to bolster its short-term cash and profits. Having supplied Safeway for many years, we have got used to delisting threats and extra demands as Safeway’s year-ends approach, but this year-end has been quite exceptional.
Demands for six-figure payments (in cash and by the end of March, if you please) breach the Government’s code of practice. Safeway’s suppliers, who have had to manage numerous other breaches, are not expected to do anything about that, as any report to the OFT could damage their business even more.
“These six-figure sums must add up to many millions, and one wonders how Safeway’s profitability would look without these one-off payments.”
In response, Safeway denied that it has breached the code or that it has increased efforts to claim rebates, which are based on the level of sales and are common practice in the supermarket sector. A spokesman said: “At this time of year we and our competition normally review the profits that some suppliers have made from us and the prospective business for the months ahead. We then have a negotiation.”
