Tesco promises no delists if suppliers refuse fulfilment fee request

Tesco has promised Groceries Code Adjudicator Mark White that no suppliers will be delisted if they refuse to sign up to its controversial new system of fulfilment fees.

In an exclusive interview today, White said he has appealing for suppliers to come forward with evidence about the supermarket giant’s move after being bombarded with complaints from suppliers and trade organisations.

The Grocer revealed last week Tesco had written to suppliers announcing new charges for those selling on its online platform or through its Booker operations.

The letter included a warning from chief product officer Ashwin Prasad that Tesco would look at a range of other actions if it did not get supplier sign-up.

“Without introducing a supplier contribution, we would need to take additional decisions on range optimisation, differentiated price and trade plans,” the letter said. “It is important you work with us on the fulfilment fee as we both look to benefit from the investment into serving customers.”

White said he would be meeting with Tesco’s code compliance officer David Ward this week for a scheduled meeting, during which the new charges would top the agenda, but said he had already contacted Tesco about its proposals.

“Whenever one of my retailers makes a change that could potentially affect or does effect suppliers, I engage with that retailer to make sure it doesn’t fall foul of the code,” he said.

“That’s all part of my collaborative approach and that’s exactly what I have been doing, and will continue to do, in response to this proposed introduction of fulfilment fees.”

He added: “Tesco has told me this fulfilment fee is voluntary, that suppliers opt in and no one will be delisted if they refuse to agree or refuse to negotiate.

“But obviously it is really important that I hear form suppliers about their experience as part of my continued engagement with Tesco.”

White said Tesco’s letter had raised both “specific and general” areas of potential concern. They are whether Tesco’s letter is effectively a “pay to stay” request, which is banned under GSCOP, and whether it breaks the code for not treating suppliers fairly.

Tesco has said it will charge branded suppliers 12p per unit sold and own brand suppliers 5p per unit.

White said Tesco had also promised that concerned suppliers could contact Ward directly without fear of repercussions.

“He has confirmed to me that any contact with him will be on normal engagement terms, where he absolutely categorically respects their confidentiality.”

Today Prasad told The Grocer: “Our intention with the initial letter was to be transparent and honest and our engagement with suppliers reflects the values of collaborative working that we’ve built with partners over the years. I would encourage any supplier, whether you have questions or concerns, to simply talk to us.

“Our online business remains significantly larger than before the pandemic, and as we said in October, we’ve retained nearly 70% of the customers that we gained over the last few years. Our suppliers have also benefitted from the growth of this channel and this request is about looking for a sustainable solution to rebalance those significant fulfilment costs.”