The manufacturer’s policy of demanding suppliers made investments in its business drew flak from a range of sources, including at least one member of parliament and food commentators. One supplier complained the practice was akin to having “a gun held against the head”.
Ceo Darby defended the ‘Invest for Growth’ programme but acknowledged mistakes had been made in its implementation in an article written for FoodManufacture.co.uk’s sister title The Grocer.
“While the programme has operated successfully for some time, it’s clear we made mistakes in how we executed some elements,” wrote Darby. “However, we have learned from this experience, taken rapid action to modify our programme and we’ll do better in the future.”
‘Never a comfortable place to be’
Darby also noted in the article: “Having your business ethics challenged in the court of public opinion is never a comfortable place to be.” The barrage of criticism was a reminder to be constantly aware of “the environment in which we operate” and “how one’s business practices can be perceived by others”.
But he added that it should be no surprise that businesses seek to get best value from all their commercial relationships. Premier Foods had a duty to its employees, customers and shareholders to be as competitive as it could. That was particularly true in today’s grocery market where consumers are looking for the best bargains and are increasingly prepared to shop around.
“The whole supply chain, including retailers, manufacturers and suppliers, are very conscious of the need to give consumers good value,” said Darby. “This was the context for our ‘invest for growth’ programme.”
‘Invest in a growth journey’
Premier Foods had communicated openly about the programme over the past 18 months in supplier meetings and conferences and also to investors, he argued. Darby said it was reasonable to ask suppliers to “invest in a growth journey from which we would both potentially benefit”. Such investments had helped the manufacturer invest in new products, marketing and promotions.
In return for investments, many suppliers had gained a larger slice of business, enabling some to grow their own businesses and take on more people, as they had confirmed publicly, Darby said.
More than one third of Premier Foods’s top 250 suppliers employed fewer than 250 employees, while a quarter of the firm’s total procurement spend was with small businesses. Over the last year the manufacturer claimed to have spent nearly £8M more with these suppliers.
Darby concluded his article: “My hope is that recent events won’t detract from what we do every day to be a decent and ethical business partner.
“We’ve had a strong reminder how critical perceptions can be and the importance of executing one’s business practices consistently and in line with society’s expectations. This is a salutary lesson for all of us.”