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Supplier reps urging Kroger to formally rescind new payment policy

Numerous produce suppliers have reported that Kroger executives have responded to inquiries on an individual basis stating that that these vendors will not be subject to the recently-announced, new, 90-day payment policy. However, supply-side trade associations are asking for an industry-wide announcement from the giant retailer so that all suppliers can participate in the relaxation of the policy if that is the case.

“More than a dozen shippers have told me that Kroger has informed them that they will not be subject to the new policy,” said Matt McInerney, senior executive vice president of Western Growers.

krolog He noted that these shippers have each had individual conversations with the retailer and have expressed their unwillingness to accept the 90-day terms nor any discount to be paid on a timelier basis as the policy announcement offered. “They are not willing to negotiate away their PACA (Perishable Agricultural Commodities Act) Trust rights,” McInerney said. “While it is promising that Kroger has come to this position for these specific shippers, we need them to clarify the policy for everyone.”

The WG executive characterized the shippers he talked to “as the larger shippers in the industry that do a significant amount of business with Kroger. We want to make sure this policy extends to all shippers.”

He added that at least two moderate-sized shippers were contacted by a factoring company – C2FO – informing the shippers that accounts had been established on their behalf by Kroger to allow them to get paid in a timely fashion at a discounted rate. “That is not acceptable,” McInerney said.

Western Growers reached out to Kroger asking for written clarification in late June but had not received any communications return by early morning July 9.

Echoing the sentiments of Western Growers’ McInerney was Ian LeMay, director of membership and communications for the California Fresh Fruit Association, headquartered in Fresno, CA. He said that through back channels the association has heard that some of its members have received a favorable response from Kroger relaxing the payment policy on an individual basis. “We do not feel that is adequate,” LeMay said. “We don’t think Kroger should pick off or peel off certain suppliers and change the policy. We think it should be formalized and we have submitted a letter to Kroger asking them to do so. We sent it about a week ago,” LeMay said on July 9, “and we have not yet had a response.”

The CFFA representative said that on its face the new payment policy is unacceptable, and he also railed against the precedent-setting approach. He said it is “bad policy” for retailers to take, and suppliers accept, unilateral action changing the terms of the buy/sell agreement.

Kroger announced its policy in a letter to all of its suppliers in mid-June. The letter stated that “as of August 1st, 2018, The Kroger Co. will standardize its payment terms to Net 90 across all aspects of our business effective immediately.” The letter did say that the new policy is “not considered optional” but, as noted above, some produce suppliers have heard otherwise directly from their Kroger contact. Kroger is currently rated as a “B” with regard to its payment timeliness, which is defined as 22-28 days between invoice date and receipt of check.