Fairfax media has obtained documents revealing that Australian supermarket giant Woolworths has requested payments from suppliers to fill its profit gap.
Woolworths has asked suppliers to pay for the gap in profits as a result of its discounted promotional campaign ‘Cheap Cheap’ by 31 December, according to Fairfax.
“Woolworths expects to maintain the same profit margin per item, even if it’s our choice to discount it,” an unnamed Woolworths employee told Fairfax. 'We call it margin backfill … We discount a product to increase sales, but the profit per item is lower. Management has pressured us to go back to the suppliers and get them to pay the gap, as if we had sold that amount of product at the normal RP [retail price].'
Woolworths has rejected the allegations, stating it has been working with the Australia Food & Grocery Council to build “constructive, mutually beneficial” relationships with suppliers.
'They [category managers] are thoroughly trained to negotiate firmly but fairly with suppliers which results in cheaper groceries for our customers,' said the Woolworths spokesperson. 'We do not use threats or extract payments unilaterally. Nobody has provided evidence of any kind of inappropriate or unlawful conduct.'
The Australian Consumer & Competition Commission (ACCC) has received complaints against the supermarket and is investigating claims of “unconscionable conduct” as a result of the information obtained by Fairfax, and has requested suppliers to come forward if they have had similar experiences with Woolworths.
'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 info centre and requesting to speak to a senior manager involved in supermarket supplier investigations,' ACCC chairman Rod Sims told Fairfax.
The allegations against Woolworths come days after Coles agreed to pay A$10m in fines and repay suppliers after the ACCC launched legal proceedings against the supermarket giant earlier in the year.
