Premier Foods will simplify controversial demand for investment from suppliers

7th Dec 2014 14:42

Premier Foods, the owner of some of the most famous UK's food brands, will drop its request for investment from suppliers but will ask for a discount on the prices it pays for goods.The firm came under fierce criticism from politicians at the end of last week, when it emerged that it had sent a letter to its suppliers demanding investments from them and warning companies they'd be removed from the list of approved suppliers if they failed to meet the demand.Vince Cable, the Business Secretary, described Premier's behaviour as "wrong" and urged competition authorities to take actions, while Sajid Javid, the Culture Secretary, said the firm's actions were "beyond the pale".In a statement, Gavin Darby, chief executive of Premier refused to apologise and said the company will continue to seek retribution from its suppliers, albeit in a different way."Most companies look for value from their suppliers and will commonly negotiate discounts or lump sums wherever they can which will be offered and accepted by suppliers if they believe their business will benefit," said Darby."This is standard business practice. The investment payments we have requested from our suppliers are effectively just one form of discount of which there are many different types."Darby added that Premier's decision had been "misinterpreted" and that the firm will adopt a simpler programme in the future."Over the last few days it has become apparent that this mechanism has been widely misunderstood and misinterpreted," he said."In this situation, we are fully prepared to simplify the details of our future programme to a more conventional type of discount negotiation, potentially based on price, value or volume based rebates, or lump sums."The most important aspect for us is that we continue to develop strategic supplier partnerships that are focused on delivering mutual growth."