Woolies In More Strife For “Shaking Down” $18 Million From Suppliers

If Woolworths hasn’t walked under a ladder, had a black cat cross its path and smashed seven mirrors then we have no idea what’s causing its run of bad luck of late.

Following yesterday’s announcement that the troubled grocer had switched creative agencies from Leo’s to M&C Saatchi (it’s fourth in almost as many years) comes news today that it is begin investigated for unconscionable conduct with its suppliers.

The ACCC has accused Woolworths’ managers of trying to pressure some 200 suppliers to pay some $18 million to show they supported the grocery chain. The money, it is alleged, was then used to plug profit shortfalls.

Known as the ‘Mind The Gap’ scheme and allegedly approved by management, if suppliers made the requested payments they would be shown to be “supporting” Woolworths, and if the payments were not made, it “would not be supporting Woolworths”. The payments were calculated on how much profit Woolies made from the sale of the supplier’s actual product – less the profit the higher the payments.

“Woolworths intentionally applied pressure to the Tier B suppliers to make the Mind the Gap payments by communicating to them that if they did not make the payment it would or might jeopardise their ability to access customers through Woolworths customers,” the ACCC said.

News Corp is this morning reporting that the ACCC wants the $18.1 million refunded and wants the grocer find $1.1 million for its actions.

The claims come amid allegations from local agencies that the large grocers were putting so much pressure on suppliers to reduce their prices it was having and adverse affect on lots of FMCG clients’ marketing and creative budgets. Some agencies have told B&T that some brands were getting so screwed by the large chains on price that it was having a detrimental flow-on effect on their creative spends.

That’s not to suggest that the grocers themselves have curbed their spends with the big three – Coles, Woolies and ALDI – spending big dollars to tell consumers how cheap they are in recent times. Yesterday B&T reported that ALDI had almost doubled its annual advertising spend in 2015 to $29.9 million. According to Nielsen’s Advertising Information Service figures Coles spent $53.6 million in 2015 and Woolies spent a whopping $87.9 million telling everyone they were ‘Cheap Cheap’.

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