In a letter this month, seen by the BBC, the high street retailer says it wants a reduction of costs of at least 5% from all its suppliers.
It also wants suppliers to pay for £3m worth of security tags and CCTV.
The Forum of Private Business has described it as a "smash and grab raid" on the supply chain.
"I am surprised at the unwholesome attitude of Holland and Barrett," said Ian Cass, Managing Director of the FPB.
"Many
of their suppliers are small firms who have helped the retailer
increase their margins and have been unable to put up prices themselves
over the last few years."
"Sometimes it is helpful to suppliers
to offer discounts to retailers in return for product placement or
increased marketing of their products, which is beneficial to both
parties, but this needs to be agreed by both sides, not a unilateral
decision as in this case."
'Suppliers not contributing'
Holland and Barrett is
owned by the American private equity company, The Carlyle Group, and
has 735 shops in the UK and Ireland. Last year its profits increased by
12% to £146m.
In
its letter, the company said that it increased turnover thanks to a
range of new initiatives and internal investment but that suppliers were
not contributing proportionately to the growth of the business:
"Indeed, during a period when there has been little
or no inflation, a general fall in food prices and fuel costs at their
lowest for more than a decade, we have seen our margin eroded
substantially by increased product costs," it said.
"We cannot
allow this situation to continue and make our proposed investment.
Therefore in addition to the cost price freeze referred to above, we
now require a reduction in costs of at least 5% from all our suppliers
.
This will be entirely separate from the 12.5% retrospective discount
introduced last June in respect of stock which we ship internationally."
" As a separate measure during 2016, we are also investing £3m
in security tagging and high definition CCTV to address the issue of
product theft - which is nearly 2% of sales. Our suppliers will have to
cover the cost in the form of invoice adjustments and/or free stock."
'Appalling example'
The letter has been greeted with dismay and anger by one small supplier
, who did not want to give his name for fear of losing his contract.
"This
is yet another appalling example of how big business often treat
suppliers and is very damaging to everyone, especially smaller
businesses."
"This move by H&B is draconian and totally
unethical. H&B are not in financial difficulty nor do they
desperately need suppliers help financially."
"What they will
gain is a 5% increase in profits and dividends for their shareholder for
nothing. What they have done to their suppliers is abhorrent."
'Not surprised'
David
Sables, founder of Sentinel Management Consultants, which helps advise
suppliers, said it wasn't always easy for small businesses to react.
"I'm
not completely surprised by this. It's reminiscent of the type of
behaviour we used to see before the Grocery Code of Practice was
introduced."
"It's difficult for the smaller suppliers to know
how to react because there's a lot at stake. Quite often it's a
negotiating tactic, but you have to know how to respond and deal with
it," he said.
In a statement, Holland and Barrett said:
"We
have made significant investments over recent years to drive the growth
of the brand, including a major increase to both our UK and overseas
store numbers and investments in both staff training and ecommerce
technologies including click and collect.
"Naturally, suppliers benefit from the resultant increase in sales this growth brings, as well as customer and brand reach.
"This
latest initiative is not the start of a negotiation process but a
further part of this growth strategy which we are now in the process of
communicating to our suppliers."
The Forum of Private Business said it would be writing to the company to make clear its concerns.
It has a hall of shame of other companies it has accused of mistreating suppliers.
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