James Moore: Despite partial climbdown by Gavin Darby suppliers will still get to ‘invest’ in Premier Foods’ future

Outlook: If the suppliers have won any kind of a victory here it’s of the pyrrhic kind

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The Independent Online

Premier Foods is apparently in the midst of an ignominious climbdown in the wake of revelations about the so-called “pay to stay” payments it has been stinging suppliers for.

These, you may remember, were upfront cash bungs that suppliers were told to cough up if they wanted to continue doing business with Premier, which has been having a few financial problems of late.

The company’s chief executive, Gavin Darby, preferred to describe them in a letter as an “investment payment to support our growth”, which is rather like referring to gamma radiation as magic moonbeams.

Unfortunately for him, the Beeb got hold of the letter and a storm of controversy ensued, with just about everyone who read about the practice describing it as outrageous, including the Business Secretary, Vince Cable, who suggested the Competition and Markets Authority might like to take a look.

Faced with the potential of the bovver boys from the regulator breaking down his doors, Mr Darby appeared to concede a partial defeat, albeit with precious little grace, as he huffed and puffed about people misinterpreting the scheme.

And then he said this: “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.”

In other words, life isn’t really going to change very much for the unfortunate suppliers at the heart of the affair. Because Mr Darby and his colleagues, who have only promised to “simplify” their scheme, will now be looking to the “many different types” of discounts, rebates, bungs, whatever.

So expect the investment payments to be back in the very near future, only in the form of something like advance rebates on future orders to reflect the high volume of business we do with you. At which point most people will scratch their heads and move on. This is something Mr Darby’s rivals have already cottoned on to and which they have counted on. They like magic moonbeams too.

If the suppliers have won any kind of a victory here it’s of the pyrrhic kind.

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