Tesco to charge online, Booker suppliers new fulfilment charge

LONDON (Reuters) - Britain's Tesco has told the suppliers of its online and Booker wholesale operations that they will need to pay a new fulfilment charge if they want the country's biggest retailer to sell their products.

Suppliers could face consequences if they don’t agree to pay the new charge, per an e-mail to Tesco suppliers sent by Ashwin Prasad, group chief product officer. The news was first reported by industry publication The Grocer.

“We are writing to notify you of our intent to introduce a new fulfilment fee. We intend this fee to be applied across the whole Tesco Group, with an initial rollout to the Tesco UK and Booker businesses,” Prasad’s mail said. “Without introducing a supplier contribution, we would need to take additional decisions on range optimisation, differentiated price and trade plans.”

Prasad did not detail the extent of the fee. However, The Grocer said it would be 12 pence per unit on branded goods and 5 pence per unit on own-label products.

However, Tesco’s “smallest suppliers” would not be subject to the fee, Prasad said.

The Groceries Code Adjudicator, which regulates relationships between Britain's biggest grocers and their suppliers, said it was aware of the issue and was seeking further information from Tesco.

"We encourage suppliers to get in touch with any concerns," said a spokesperson for the GCA.

A spokesperson for Tesco defended the new charge.

“Over recent years, the way we serve our customers has grown in both capacity and complexity. Our customers expect us to serve them wherever, whenever and however they want to shop," the person said.

“As we respond to changing shopping habits and our fulfilment costs continue to grow, we are talking to our suppliers about how we can work together to create a more balanced approach and ensure we can continue to invest in our customers.”

Tesco's supplier relationships have been transformed since a 2014 accounting scandal, with the independently run supplier Advantage Report often ranking it as the best supermarket group to deal with.

However, in January Tesco chairman John Allan was accused of living in a "parallel universe" after he said food companies may be using inflation as an excuse to hike prices more than necessary.

(Reporting by James Davey; Editing by Dhanya Ann Thoppil)