Suppliers at end of the queue
Irish consumers pay some of the EU’s highest food prices.
Local shops are closing down, unable to compete with three chains which will shortly control nearly 80% of the grocery market.
To secure a place for their goods on the shelves of our main supermarket chains, suppliers have to pay ‘hello money’ — estimated to total €160m per year by Fine Gael. In their Private Members Bill in 2009, Fine Gael warned that forced payment of ‘hello money’ put thousands of jobs at risk.
At least some of the big retail chains refused to co-operate in agreeing a voluntary code of practice, until too late, when the government set its sights on a statutory code.
The Government’s fears of unfair trading in grocery retailing have been reinforced by the mess after Superquinn went into receivership — with only 6.2% of the grocery market, unable to survive alongside Tesco with 27.3%, Dunnes with 23.7%, and SuperValu with 19.7%.
It became clear that suppliers were being kept waiting 90 days for payment for the goods shoppers were buying in the supermarket chain. And when a receiver was appointed, the suppliers’ cheques bounced. About 600 Irish suppliers, including farmers, were left short an estimated €50 million.
Labour Senator John Whelan produced a list of more than 50 small family businesses and suppliers that were issued with cheques dated Thursday, June 30, which arrived on Friday, July 15. When the businesses tried to cash them on Monday, July 18 — the day a receiver was appointed — they learned the accounts were frozen.
Many suppliers were left facing staff layoffs and business failures.
FDII, the IBEC group that represents the food industry, said individual food and drink companies were owed tens of thousands, hundreds of thousands and in some cases millions of euros, and some would close within weeks if not paid.
As part of a takeover of Superquinn, the Musgrave chain will make a fund of €10m available to the Irish suppliers, particularly those who do not have credit insurance.
But the bankers have again emerged with a bad smell.
Bank of Ireland, AIB and National Irish Bank, who appointed the receivers, were happy for Superquinn to continue to accept supplies on credit while preparing to bring down the shutters.
With farmers’ interests at heart, IFA President John Bryan has written to Enterprise Minister Richard Bruton, insisting on payment within 21 days of delivery for suppliers to supermarkets, in Bruton’s statutory code of practice.
Retailers have been hoarding cash and earning substantial bank interest at the cost of suppliers waiting for payment.
Even in the Wild West of the cattle trade, farmers insist on payment on the day and retention of title until goods delivered are paid for in full by retailers. Milk suppliers receive a cheque each month.
Minister Bruton hopes to publish his fair retail trading legislation and present it to the Oireachtas before the end of this year.
In the meantime, farmers and other suppliers will have to arm themselves against becoming retail trade victims like Superquinn, which had become the subject of growing speculation as its market share slumped from 6.8% last year to 6.2% this year, and rival retailers and finance houses were asked if they would be interested in taking over the chain.
