Premier Foods’ decision to strike customers off its supplier list for failing to make payments has been branded “aggressive” by the Federation of Small Businesses (FSB).
It is now encouraging businesses to come forward anonymously with their accounts of how Premier Foods and other companies have attempted to force payment in order to “make an issue in the media”.
While Premier Foods, the company behind Mr Kipling cakes, is adamant it is not breaking competition law by demanding compulsory ‘investment payments’, an FSB spokesman told British Baker that the lines were not clear.
“Premier Foods doesn’t think it is breaking competition law and there isn’t any case law as it hasn’t been examined by the CMA (Competition and Markets Authority),” he said. “There isn’t any clear line as to whether this is legal or illegal. It is very hard, sharp practice and is considered by many to be a very aggressive way of treating your customers.
“The fear is whether this practice will become the norm and the big issue is that businesses are afraid to come forward.”
The FSB is not aware of any other bakery-related business imposing similar payment practice. It said it has “long been concerned about the deteriorating payment practices in the supply chain”. Premier Foods is the first to make such a link between payment and inclusion on supplier lists and also to indicate that payments are to become annual.
The FSB said that by forcing smaller businesses to make such supplier list payments, suppliers are pushing them to “breaking point”.
Research carried out by the FSB showed that late payment had resulted in a third of its members paying their own suppliers late (32%), three in 10 say it has restricted their ability to grow (29%) and well over a tenth say it has resulted in difficulties paying staff (15%).
John Allan, national chairman of the Federation of Small Businesses, said: “Premier Foods should be ashamed of themselves. Driving a hard bargain with your suppliers is one thing, but demanding a cash gift under the threat of delisting, is downright unfair.
“The deterioration of payment practices is an anchor dragging on the potential of small and medium businesses to grow and take on new staff. Too many firms are waiting months for the money they are owed, and this has knock-on on their own supply chains. If the questionable practice being attempted by the likes of Premier Foods becomes the accepted norm, it may well sink those small firms without the cash reserve to prop up their larger customers.”