Frozen foods retailer Iceland has backed down in a fierce row over controversial changes to its trading terms.

After a supplier revolt, the chain has agreed to withdraw a demand for a 2.75% settlement discount on invoices.

It has also reached agreement with suppliers over changes to payment terms, which Iceland had wanted to extend to 90 days, compared with around 45 now.

Some suppliers have agreed to alterations to their payment terms in a compromise agreement, but others will see no change whatsoever in their trading relationship with Iceland after standing up to the retailer's demands, it is understood.

It remains uncertain whether all suppliers have benefited from Iceland's change of heart over the new terms, which were issued by the retailer's holding company, Icebox Holdings, in November and had been due to come into force last Tuesday (1 January).

An industry insider said several suppliers he had spoken to said they had benefited from the retailer's u-turn. "It's become clear that Iceland is willing to negotiate," he added.

One Iceland supplier spoken to by The Grocer said it had simply told representatives of Iceland and Icebox in a meeting that, like most food businesses, it was not in a position to agree to a settlement discount of 2.75%. "We were just honest that we couldn't afford it," he said. "We told them: you need us to be a viable long-term supplier. I think they got their heads round the fact."

Another supplier said it had received a letter from Icebox Holdings stating it was willing to "make a special exception" and "reluctantly move to 90 days with 0% settlement discount".

However, in spite of this offer of compromise, the supplier in question insisted that the extension of payment terms remained unacceptable.

"Now that's the next fight," he said. "But at least we are seeing light at the end of the tunnel."

Iceland's willingness to compromise with suppliers over the changes represents a dramatic about-turn. It had previously insisted in correspondence with disgruntled suppliers that the changes to its terms and conditions were "non-negotiable".

One supplier said Iceland may have been forced to think again because it faced the prospect of several suppliers refusing to supply the chain on the basis they could not afford to do so.

"I have spoken to a number of people who said that if Iceland had gone down this route they would have had to shut the door on them.

"Unless you're making a huge whack out of them, you wouldn't be able to afford these changes."

Another supplier, which revealed it had also been told it would no longer face a settlement discount and had reached an agreement over payment terms, said: "We'd gone to the wire and said: if you're not negotiating then we're not supplying you. But common sense has prevailed."

Iceland declined to comment. The retailer had previously said it believed the changes to its terms would bring it into line with its "peer group".

It also claimed suppliers had "done well" out of Iceland's success in recent years.

Topics