Tom Salmon former managing director of Hedon Salads, one of the grocer’s key producers of aubergines, tomatoes, cucumbers and peppers, reveals how his company was treated by Tesco.
Salmon had experienced first-hand the relationship between the grocer and some of its suppliers that is being examined in an internal probe.
Most of the supermarkets, along with Tesco, strike similar arrangements with their suppliers.
Salmon hopes that by exposing some of the practices of the previous Tesco management, it will help the grocer start with a clean sheet when it updates on the progress of its investigation tomorrow.
Salmon left the firm three years ago so his experiences are historic, however, they reflect a time when the highly regarded former chief executive Sir Terry Leahy was at the helm.
It is also important to know that Hedon Salads collapsed into administration in 2012.
There is no suggestion that this was as a result of any of its dealings with Tesco. It supplied a number of retailers.
Hedon was the prominent supplier of fresh salad to Tesco, owning large glasshouses.
‘My company has supplied all the major retailers and I have over 40 years’ experience in the ways that they work,’ Salmon said.
‘I thought my story may help in some way explain what suppliers have gone through and give a slightly different perspective on the demise of Tesco.’
From 2002 he says Tesco started to change the way it did business and the supplier became more responsible for the prescribed profit margin that Tesco’s buyers had to achieve.
He said that over the years Tesco introduced extra charges to the supplier.
‘As time went by these charges became more onerous, first it was to pay for new quality ideas’, he said. ‘They charged for new a label system, they charged for the introduction of new technology and they took the same line every time.
‘If you want to supply Tesco you have to pay. As the years went by the charges became more unreasonable, the buyer’s profit margin was down and he or she was not going to make their bonus.
‘What were we as a supplier prepared to pay at the start of next season before the buyer would even consider us as a supplier?’
For decades, big suppliers such as Kellogg’s, Coke and Gillette have paid supermarkets to help fund promotions to shift more of their goods. This can mean they contribute to advertising campaigns on television and in newspapers, or they might fund a special display in shops.
Sometimes, when items are discounted, say from £9 to £5, it is the suppliers that pay the £4 difference. On top of this, suppliers also pay supermarkets fees to place their items in the best positions on the shelves.
Salmon says: ‘My company also had to face a wave of supplementary charges.
‘We had to buy all our packing from a stated supplier from which Tesco took a roll [a cut] off the top. The worst case was in 2010 when the weather in Southern Spain was so bad that salad produce was very short.
‘We could not supply aubergines for two weeks and the result was Tesco fined us £45,000 for loss of profit.
‘We declined the fine and said we would not pay, they promptly took the money from our account that they owed us.
‘At the end of 2011 I retired, but I felt that the Tesco bubble was starting to burst. Suppliers could not go on supplying like this.
‘It had become impossible to service Tesco with all these add-on costs and demands.’
Tesco had not responded to a request for comment at time of publishing.
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Supplier tells of harsh treatment by retailer
"If you want to supply Tesco you have to pay"
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