BBC :
Premier Foods, one of the UK’s biggest manufacturers, has been asking its suppliers for payments to continue doing business with the firm.
One supplier said the practice – known as pay and stay – was like “blackmail”.
Newsnight understands the struggling company has received millions of pounds from its suppliers in this way.
Premier Foods said it was confident the scheme did not break any rules under competition law. The government said it was “concerned by recent reports”.
The company, which owns brands like Kipling, Ambrosia, Bisto and Oxo, demanded the payments from suppliers across the country.
Newsnight has seen a letter sent by chief executive Gavin Darby, dated 18 November.
He wrote: “We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas.”
He added: “We will now require you to make an investment payment to support our growth.
“I understand that this approach may lead to some questions.
“However, it is important that we take the right steps now to support our future growth.”
We are concerned by recent reports, and are consulting to assess the evidence so we can establish what more we can do”
But when a supplier raised questions in an email about the annual payments, another member of Premier’s staff replied.
“We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list.”
One of the company’s more than 1,000 suppliers, Bob Horsley, said he had been “taken aback” to receive the letter.
Mr Horsley, who has had a maintenance contract with Ambrosia in Devon for more than 10 years, said: “I think it’s like blackmail.
“What they are saying is, ‘Unless you pay this money, you can’t do the work.'”
He has decided not to pay and risk losing the contract.
“I’m just a layman, but I can’t see how that is right.”
Apple pies Premier Foods, which has locations across the UK, said it was facing a challenging environment
Another businessman said Premier had previously asked for more than £70,000.
“They know you can’t afford solicitors to fight them. I’d never pay anyone for work.” Another said: “It’s like a gun held to your head.”
Many businesses are scared to speak out for fear of losing their contracts.
Premier Foods has reduced its number of suppliers dramatically in the last 12 months.
In 2013, it made a similar approach to some of its suppliers.
The practice of “pay to stay” is not unheard of in manufacturing and retail.
Premier Foods, one of the UK’s biggest manufacturers, has been asking its suppliers for payments to continue doing business with the firm.
One supplier said the practice – known as pay and stay – was like “blackmail”.
Newsnight understands the struggling company has received millions of pounds from its suppliers in this way.
Premier Foods said it was confident the scheme did not break any rules under competition law. The government said it was “concerned by recent reports”.
The company, which owns brands like Kipling, Ambrosia, Bisto and Oxo, demanded the payments from suppliers across the country.
Newsnight has seen a letter sent by chief executive Gavin Darby, dated 18 November.
He wrote: “We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas.”
He added: “We will now require you to make an investment payment to support our growth.
“I understand that this approach may lead to some questions.
“However, it is important that we take the right steps now to support our future growth.”
We are concerned by recent reports, and are consulting to assess the evidence so we can establish what more we can do”
But when a supplier raised questions in an email about the annual payments, another member of Premier’s staff replied.
“We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list.”
One of the company’s more than 1,000 suppliers, Bob Horsley, said he had been “taken aback” to receive the letter.
Mr Horsley, who has had a maintenance contract with Ambrosia in Devon for more than 10 years, said: “I think it’s like blackmail.
“What they are saying is, ‘Unless you pay this money, you can’t do the work.'”
He has decided not to pay and risk losing the contract.
“I’m just a layman, but I can’t see how that is right.”
Apple pies Premier Foods, which has locations across the UK, said it was facing a challenging environment
Another businessman said Premier had previously asked for more than £70,000.
“They know you can’t afford solicitors to fight them. I’d never pay anyone for work.” Another said: “It’s like a gun held to your head.”
Many businesses are scared to speak out for fear of losing their contracts.
Premier Foods has reduced its number of suppliers dramatically in the last 12 months.
In 2013, it made a similar approach to some of its suppliers.
The practice of “pay to stay” is not unheard of in manufacturing and retail.
