The Co-operative Group is calling in suppliers to demand price reductions of up to 10% as it moves to consolidate its supply base.
In May, the society sent an email to suppliers proposing an improvement in trading terms backdated to 1 March, to coincide with its £1.57bn acquisition of Somerfield. The Grocer has learnt it is now talking to suppliers about the level of reduction it expects.
One supplier claimed he had been asked for a 5% reduction. "They said if we didn't comply the business would be put out to tender via an e-auction. This puts us in an untenable situation as we are unable to supply at those costs."
The Co-op Group was re-tendering large portions of its own-label business to consolidate its supply base, another supplier claimed.
"The Co-op is shifting a lot more volume and has a lot more buying power," he said. "It's no surprise it's taking advantage of that by re-tendering contracts. Between them, The Co-op Group and Somerfield had four own-label ready meal suppliers. They've cut that down to two now." Northern Foods is understood to be one of the companies to have lost out.
Another supplier confirmed he had been asked for a 10% reduction, which was open to negotiation.
"The combined business will be smaller as stores have been disposed of. However The Co-op claims this will be more than compensated for by store refit plans, which will deliver an increase in trade," he said.
A spokesman for The Co-op Group said: "Negotiations are being conducted on a fair, commercial and constructive basis."
In May, the society sent an email to suppliers proposing an improvement in trading terms backdated to 1 March, to coincide with its £1.57bn acquisition of Somerfield. The Grocer has learnt it is now talking to suppliers about the level of reduction it expects.
One supplier claimed he had been asked for a 5% reduction. "They said if we didn't comply the business would be put out to tender via an e-auction. This puts us in an untenable situation as we are unable to supply at those costs."
The Co-op Group was re-tendering large portions of its own-label business to consolidate its supply base, another supplier claimed.
"The Co-op is shifting a lot more volume and has a lot more buying power," he said. "It's no surprise it's taking advantage of that by re-tendering contracts. Between them, The Co-op Group and Somerfield had four own-label ready meal suppliers. They've cut that down to two now." Northern Foods is understood to be one of the companies to have lost out.
Another supplier confirmed he had been asked for a 10% reduction, which was open to negotiation.
"The combined business will be smaller as stores have been disposed of. However The Co-op claims this will be more than compensated for by store refit plans, which will deliver an increase in trade," he said.
A spokesman for The Co-op Group said: "Negotiations are being conducted on a fair, commercial and constructive basis."
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