Pick n Pay reads riot act to suppliers over prices
Jan 26 2009
Retail Wrap >>

FOOD retailer Pick n Pay has summoned its suppliers to an urgent meeting to discuss high and rising food prices, which have continued upwards despite a recent fall in fuel prices. 

In a strongly worded letter to 30 of the group’s largest suppliers, CEO Nick Badminton says “in many cases, we are being asked by our suppliers for considerable cost price increases”, which he describes as “untenable — and in the case of our customers and the media, indefensible”.

Pick n Pay is asking it suppliers to exercise “serious restraint” with their price hikes.

The meeting, to be held next week, comes as food prices continue on an upward spiral despite a sharp reduction in fuel prices. 

Chris Gilmour, an analyst with Absa Asset Management Private Clients, said manufacturers had claimed fuel was a huge component of increased costs, forcing them to put prices up dramatically last year.

However, the price of fuel had come down by more than 60% since September and now consumers, the government and the unions wanted to know why the savings were not being passed on, he said.

Pick n Pay is one of SA’s largest food retailers, accounting for at least 33% of the market.

It was unclear yesterday how the suppliers would react to Badminton’s letter, but as SA’s largest retailer, the group has substantial clout. Gilmour said its suppliers would be more likely to sit down and talk than they would be with other, smaller, food retailers.

However, they would be as likely to listen to Shoprite. Pick n Pay, with its broad customer base and market positioning, vies with Shoprite on size and price. Shoprite took out adverts recently saying it would pass on diesel savings of R27m to its customers. Pick n Pay’s large suppliers, based on the group’s shelf products, include Tiger, AVI, Unilever, Pioneer, Premier, Colgate, Kelloggs, J&J, Kraft, Master Foods, Nampak, National Brands and Nola, among others.

Gilmour said some suppliers had genuine reasons for price rises, such as specialised imported products affected by rand weakness. But they “can’t have their cake and eat it”.

Adapted from Source: www.businessday.co.za, 26 January 2009