The Forum of Private Business has accused Holland & Barrett of making a "smash and grab raid" on the trade after the health food chain told suppliers to cut their bills.
Last week, Holland & Barrett chief executive, Peter Aldis wrote to suppliers demanding that they make a non-negotiable 5% reduction in their bills, as well as further "invoice adjustments and/or free stock" to cover a £3 million investment to tackle shoplifters. The letter points out that this is in addition to a "12.5% retrospective discount" that it brought in last year for stock earmarked for export.
The letter highlights the £90 million investment made by Holland & Barrett to improve retail space, drive footfall and increase customer spend and loyalty, which has helped deliver an incrase of 11.7% in turnover - to suppliers' benefit.
But Holland & Barrett says that suppliers have not been "contributing proportionately to the growth of the business".
The letter continues: “… during a period when there has been little or no inflation, a general fall in food prices and fuel costs at their lowest for more than a decade, we have seen our margin eroded substantially by increased product costs …. We cannot allow this situation to continue and make our proposed investment.”
The Forum of Private Business has described the move as a “smash and grab raid” on the supply chain. FPB managing director, Ian Cass, told the BBC: “Many of their suppliers are small firms who have helped the retailer increase their margins and have been unable to put up prices themselves over the last few years.
“Sometimes it is helpful to suppliers to offer discounts to retailers in return for product placement or increased marketing of their products, which is beneficial to both parties, but this needs to be agreed by both sides, not a unilateral decision as in this case.”
David Sables, founder of Sentinel Management Consultants, told the BBC “(this is) reminiscent of the type of behaviour we used to see before the Grocery Code of Practice was introduced.”
Talking on BBC5 Live Wake Up To Money, the executive editor of Retail Week, George McDonald said that he had “never heard of a retailer asking suppliers to pay for their CCTV and security”, adding that that was “really your (the retailer’s) responsibility.” But he also said that it was “not unusual for retailers to ask suppliers to share the cost of building the business”. And he commented: “In the current climate retailers do need to offer good value to customers. If they don’t, suppliers suffer too because suppliers products aren’t moving.”
Earlier this month the Daily Telegraph reported that Holland & Barrett – with profits up 12% to £146 million – was being prepared for sale by its US-based owner the Carlyle Group.