Woolies' Christmas threat to suppliers

Mark Hawthorne
December 19, 2014
The Age
The ACCC has now assigned one of Australia’s most experienced investigators to probe claims that Woolworths is engaging in unconscionable conduct.
Woolworths buyers have told suppliers their products could be pulled from shelves just days before Christmas if they refuse to fund the supermarket giant’s new Cheap Cheap advertising campaign.
“I was asked for a contribution of almost $1 million, and when I refused to pay I was told a ‘range review’ was under way and I would be informed of the outcome early next week,” said the sales manager of one of Australia’s leading health product companies.
“The implied threat is that some of my products will no longer be stocked if I don’t pay up.”
Woolworths staff have also been accused of telling suppliers the payment requests had the “endorsement” of the Australian Consumer and Competition Commission – a claim that the consumer watchdog rejects.
“We don’t intend to provide further comments on this specific matter. Generally speaking though, we can confirm that the ACCC does not have a practice (outside formal processes such as authorisation) of endorsing or approving conduct,” said an ACCC spokesperson.
Fairfax Media can reveal the ACCC has now assigned one of Australia’s most experienced investigators to probe claims that Woolworths is engaging in unconscionable conduct by demanding suppliers pay tens of millions of dollars by the end of December.
The team, which is being led by veteran ACCC enforcement manager Alan Ducret, has promised to provide whistleblower protection in return for information from suppliers.
Mr Ducret led the ACCC’s successful investigation into Coles for unconscionable conduct in its dealings with suppliers. This week Coles requested to settle that similar case and paid a $10 million fine.
No suppliers who assisted with that ACCC investigation have been identified.
“Should suppliers or others wish to provide information to the ACCC, including anonymously or requesting that information be treated confidentially, we would encourage them to contact us by calling our infocentre and requesting to speak to a senior manager involved in supermarket supplier investigations,” said an ACCC spokesperson.
Emails obtained by Fairfax Media showed some suppliers have received demands for more than $1 million, and were given a deadline of December 31 to make the “margin fill” payments.
Woolworths maintains that its staff have broken no laws in dealing with suppliers.
“Woolworths is working very hard to deliver lower prices to our customers,” said a spokesman. “We are constantly working with suppliers to find opportunities to drive down prices. Our negotiations have seen grocery prices fall over the past five years. Grocery retailing in Australia is highly competitive. That’s why our partnerships with suppliers are so important.”
According to a senior manager at Woolworths, fear of a profit downgrade is driving the “cash grab”. Fairfax Media was told the “margin fill” program, dubbed “Project Close the Gap”, was being driven by former Tesco executive Alex Dower, who joined Woolworths as commercial director in 2012.
Mr Dower on Thursday sent an email to his senior staff, instructing them to ignore media reports and continue to negotiate with suppliers over margin fill demands.
Fairfax Media believes that under Project Close the Gap Woolworths is asking suppliers to contribute $50 million by the end of December. As of December 11, suppliers had paid $6.7 million of that money to Woolworths. Those who are refusing to pay have been asked to attend meetings with senior Woolworths managers.
Woolworths is also seeking to recoup further money from changes to promotional charges for suppliers, and by re-billing suppliers for claimed “invoicing errors”, some of which are two years old.
The Australian Food and Grocery Council is has briefed its members on what it calls “profit gap payments” being demanded by Woolworths.
“The AFGC has been advised that Woolworths are conducting supplier reviews and requesting suppliers make up shortfalls in the profit made compared to ‘expected’ profit,” the industry body wrote to members.
“The payments claimed to meet these “profit gaps” have ranged from $70K to more than $1.5M in cases reported to the AFGC over the past week.”
The AFGC also warned its members: “Note that any suggestion by a Woolworths representative that the request has the endorsement or approval of the ACCC is unlikely to be accurate.
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