Ten months after its acquisition of Somerfield, the Co-op Group has been criticised by some suppliers for its "poor negotiation skills", but praised for speedily harmonising product ranges.
With 200 Somerfield stores on schedule to be rebranded by spring and much of the range rationalisation complete, the Co-op had made significant progress on the integration, said one supplier: "In chilled there has been a violent change of supplier base as the Co-op sought to gain additional price benefits, but Co-op ranges have now been extended to Somerfield in most areas. We're now using Co-op distribution but Somerfield ordering systems."
In general, said one source, "the Co-op has handled the integration well, in stark contrast to Morrisons' handling of the Safeway acquisition. If Somerfield had acquired the Co-op, there would have been a bloodbath for suppliers"
But others criticised the "inadequacy" of Co-op supply chain systems. One source said: "It is proving more difficult than they first thought. There are quite a few problems in the integration of the distribution systems." One md added: "Co-op infrastructure, controls and personnel are a long way behind the competition they are not yet a large organisation with a culture and skill-set that befits a top retailer.
"The intention we are always being told is to use Somerfield IT as it is more advanced. However, inadequate and simplistic Co-op systems still dominate. They still can't give me a forecast of demand and then they wonder why stock-outs occur."
Other suppliers also criticised the way the Co-op had handled the tendering process for own-label lines across the larger business. One said: "Having defined a specification that had to be met, they awarded the business to another party with a materially lower specification. But they did it all so fast I don't think they crawled through the detail of specifications as closely as they could have."
Co-op buyers had also been "exerting increased pressure on prices", added another supplier: "The Co-op's negotiation skills have been poor all they could do was to threaten during a recession to get the income they wanted."
Another added: "The line is: 'our suppliers are to fund the acquisition' on the basis that you will supply more to the Co-op. However, many of us already supply both retailers. And as they have now sold off 200 stores, overall volumes are actually lower, and yet they still want lower prices. They are also pushing out payment terms."
As many suppliers would not see cost savings from synergy benefits for at least a year, if at all, this was hard to justify, he said.