Premier Foods backtracks on pay-and-stay

By Michael Stones

- Last updated on GMT

Premier Foods claimed its investment plans had been 'misunderstood and misinterpreted’
Premier Foods claimed its investment plans had been 'misunderstood and misinterpreted’

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Under fire Premier Foods has backtracked on its controversial ‘pay-and-stay’ programme, after a storm of criticism about its demands for suppliers to invest in the business or lose their listing with the firm.

A range of commentators – including business secretary Vince Cable, Food Ethics Council boss Dan Crossley and food writer Jay Rayner – slammed the practice. One commentator on the social networking site Twitter even lampooned the business with the phrase: “Mr Kipling takes exceedingly large bribes.”

Following the barrage of bad publicity about its ‘Invest for Growth’ programme, Premier Foods promised to “simplify”​ the scheme. Ceo Gavin Darby claimed the firm had been “misunderstood”.

‘Widely misunderstood and misinterpreted’

“Over the last few days we have clearly seen that this mechanism has been widely misunderstood and misinterpreted,” said Darby ​in a statement yesterday (December 7). “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.”

Its priority was to continue to develop strategic supplier partnerships that deliver mutual growth for both parties.

The investment programme had worked well over the past 18 months in allowing the business to consolidate its supplier base and invest in innovation, marketing and promotions, it claimed. “Many of our suppliers have chosen to invest with us and have grown their business as a result, despite the challenging market environment.”

‘Standard business practice’

Darby continued: “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. 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.”

Meanwhile, spokesman for the Competition and Markets Authority (CMA) told “So-called ‘pay to stay’ arrangements are not automatically contrary to competition law. In order for us to take action in a specific case, we would need evidence that this was limiting competition to the detriment of consumers.”

Business secretary Vince Cable threatened to report the firm to the CMA, according to a report in The Daily Telegraph. ​Cable said the business had been “demanding money with menace”,​ it said.

Read how one source accused the manufacturer of “holding a gun”​ to suppliers’ heads here​.

Read how Twitter users responded to the row here​.

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