Safeway set to win over angry farmers

SAFEWAY is confident of striking a deal with the National Farmer's Union (NFU) this week over its controversial plans to make suppliers contribute to a promotional campaign.

The detente comes despite an angry meeting last week, which left the opposing sides unable to agree on a solution.

The two parties are set to meet once more early this week, and Safeway believes that this time they will be able to come to a "sensible agreement".

Farmers' representatives are furious with requests by Safeway for pounds 20,000 from suppliers of key product lines. The contributions raised are intended to boost sales by 15 per cent this year and to guarantee customers 100 per cent availability for 1,000 best-selling products.

The NFU is concerned that smaller members could either be financially crippled or find themselves blacklisted by Safeway.

After the meeting last week, the NFU fired off letters to Stephen Byers, the Secretary of State for Trade and Industry, Nick Brown, the Agriculture Minister, and the Competition Commission complaining about Safeway's proposals.

But the high-street supermarket chain insisted it would not withdraw the scheme.

"There is no way that we would be withdrawing the campaign. We have the support of the industry - a third of suppliers have already signed up in less than a week, and I expect to have 50 per cent in a month's time," said a spokesman.

"Technically it is nothing to do with the Government. This is a business matter and falls entirely within the framework of normal business relations," he added.

Safeway has also confirmed that it is willing to negotiate reductions in the pounds 20,000 payment for suppliers who would find it hard to come up with such a sum or who are experiencing financial difficulties.

Analysts are not expecting any surprises in Safeway's announcement of its interim results this week.

"We have been told that pre-tax profits will not be more than pounds 150m, but we are not expecting any new news. The new management is concentrating on trying to lift sales off the ground," said Paul Smiddy, an analyst at Credit Lyonnais Securities.