Premier Foods ditches controversial "pay-to-stay" scheme following fierce criticism

 
Joe Hall
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Premier Foods manufactures brands such as Ambrosia, Mr. Kipling and Sharwood's (Source: Getty)
Premier Foods has defended asking suppliers for payments in exchange for its business after receiving widespread criticism for the so-called “pay-to-stay” practice.
The food manufacturer behind some of Britain’s most renowned brands including Mr. Kipling, Ambrosia, Oxo and Bisto, says that its “invest for growth” programme has been “widely misunderstood and misinterpreted” over the last few days.
However, a company statement released on Sunday also said that it would be “simplifying” its programme to a “more conventional type of discount negotiation”.
A BBC Newsnight investigation aired last week revealed that Premier Foods chief executive Gavin Darby had sent a letter to suppliers telling them “an investment payment” was required.
Shares in the company fell over six per cent on Friday in the wake of fierce criticism of the “pay-to-stay” scheme. Business secretary Vince Cable described it as “wrong” while John Allan, chairman of the Federation of Small Businesses, said that Premier Foods “should be ashamed of themselves”.
Premier Foods defended its programme by arguing that suppliers who contributed “have grown their business as a result, despite the challenging market environment.”
The under-fire company will now be adopting the more common approach of simply looking for discounts from suppliers “potentially based on price, value or volume based rebates or lump sums.”
In October Premier Foods announced a profit warning for 2014, as third-quarter sales dipped in amidst difficult market conditions.

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