Co-op pushes to extend supplier payment terms

Buyers at the Co-operative Retail Trading Group (CRTG) are pushing for extended payment terms in addition to improved buying terms as they seek to drive synergies from the £1.6bn acquisition of Somerfield.

Manufacturers supplying the Co-op Group have told Food Manufacture​ that as part of the round of negotiations taking place in the wake of the deal, the Co-op Group was “seeking ‘support’ for the funding of its operation in the form of extended terms of trade - ie payment terms”

One own-label manufacturer who supplies both retailers, said: “It’s completely unjustified and it won’t be supported.”
Additional demands for suppliers to backdate reductions in invoice prices to March 1 have also prompted angry responses, especially given that few manufacturers currently supplying both Somerfield and Co-operative stores believe they will see any cost savings through synergy benefits for at least a year - if at all.
One branded supplier said: “We already have very good distribution in the trade and we’re well represented in Somerfield and Co-op Group stores. While we will in future only have one account to handle and one head office to visit, there are no immediate ‘synergy benefits’ for us from this deal. It’s possible that if they consolidate the supply chain we might see some very small benefits well down the line, but right now the ‘we’re bigger and stronger now so give us better terms’ argument doesn’t stack up.”
Given the weakness of sterling, which had significantly increased costs for firms buying products in euros or dollars, many suppliers were “not in a position to hand anything over at this stage anyway”, he added.
Another frustration was the Co-op Group’s buyers’ “reluctance to provide written documentation - as they should now do with their market share above the 8% required by the Competition Commission”, said one own-label supplier.
While manufacturers currently only supplying one of the two retailers had potentially the most to gain, they also had the most to lose, said another. “That’s where the carrot and the stick really comes in and you have to be very well prepared for the negotiations. I think many of us have worked very hard to help the Co-op Group expand in recent years and feel surprised about how they are handling things now.”

As for day-to-day account handling issues, it was also becoming increasingly difficult to contact Somerfield buyers, noted one branded supplier. “We’ve been told that the Somerfield head office will be handling enquiries until September 1, but our business with them is now being handled by a buying assistant. A lot of people have already left.”
A Co-op Group spokeswoman said: “We do not comment on speculation about confidential negotiations with suppliers. However, I can confirm that the Society does not impose standard payment terms on its suppliers but agrees terms separately with each of them.”