Premier Foods criticised for demanding “investment payment” from suppliers

Premier Foods has come in for criticism for asking suppliers to hand over money or face losing business with the company.

Premier, owner of the UK's most popular food brands, including Mr Kipling, Oxo and Bisto, has written to its suppliers requesting an ''investment payment''.

Firms that fail to pay up, run the risk of being taken off its approved 1,000-strong supplier list.

According to The Federation of Small Businesses (FSB), Premier ''should be ashamed of themselves''. It claimed that one small company had been asked to hand over £1,700 to secure the chance of future business.

According to John Allan, national chairman of the FSB, driving a hard bargain with your suppliers was one thing, but demanding a cash gift under the threat of delisting was downright unfair.

If the questionable practice being attempted by the likes of Premier Foods became the accepted norm, it might well sink those small firms without the cash reserve to prop up their larger customers."

Meanwhile, the BBC reported yesterday that Premier Foods PLC had been accused of asking its suppliers for payments in order to continue doing business with the company Alliance News said.

Citing findings from a Newsnight investigation, the BBC said Premier Foods had received millions of pounds in payments under the practice, known as 'pay and stay', with one supplier describing the system as "blackmail".

Meanwhile, the maker of Mr Kipling cakes and Bisto gravy among many other food brands, said it was confident the scheme did not break any rules under competition law, but government sources said it was "concerned" by the reports, the BBC said.