Industry Associations React to Kroger's New Policy
UNITED STATES - As the potential effects of Kroger’s recent and sudden move to standardize its payment terms to “Net 90” across all aspects of its business sink in, industry voices are continuing to rise. Leaders of the California Fresh Fruit Association (CFFA), Texas International Produce Association (TIPA), and NAPAR all released reactions to the retailer’s move yesterday.
Matthew D’Arrigo, of D’Arrigo Bros Co. of New York, Inc. and Chairman of NAPAR, advised members “to proceed with extreme care.”
“Agreeing to any retailer’s 90-day payment policy would forfeit their rights and protection from the PACA Trust,” he commented, according to a press release.
A produce trade association that exclusively represents produce wholesalers and receivers, NAPAR noted it is deeply concerned about the new payment policy, citing that many produce suppliers, especially wholesalers and receivers, are small family-owned and operated businesses providing highly perishable produce to large retailers and foodservice businesses.
“It is inappropriate, if not illegal to force suppliers to forfeit their rights under the Perishable Agricultural Commodities Act (PACA), an act created specifically to protect the perishable fresh fruit industry. We are very disappointed with Kroger’s decision,” said CFFA President George Radanovich in a statement. “It is our understanding that Kroger has expressed a willingness to be flexible with this new policy, but 'flexibility' in this matter won’t help.”
As President and CEO of TIPA, Dante Galeazzi also shared with me that he has heard the retailer is open to meeting with and discussing the produce industry’s plight.
“We are concerned with the stance that Kroger has taken in wanting to go to 90 days on pay. Many people in Texas and those throughout the country have limited cash flow that gets tied up in the crop,” Dante tells me. “A lot of our industry is putting money in the crop and depending on being able to collect revenue within 20-30 days after the sale. This will put them in a challenging position and we want to let Kroger know those challenges and forfeiting companies’ PACA trust is an unnecessary risk.”
Dante also explained that he has heard from many that have talked to Kroger who are receiving feedback that the retailer is open to discussion.
“I think communicating with the industry about our concerns is the way to go, as Kroger has a great history with companies down in Texas and with the produce industry at large, and I’m sure they are very conscious that many in the industry are worried,” he said.
PACA was meant to level the playing field in the produce supply chain and protects the wholesaler supplying the food industry’s giants, and Matthew called upon Kroger to exempt produce suppliers from its new policy.
“This is not a decision to be made lightly and may not be good business practice,” he concluded. “It may be a workable policy for the many non-perishable suppliers Kroger has, but providing fresh produce is a very different business. The process from harvest to sale in the grocery store is short, and produce suppliers need to be paid promptly to cover their expenses.”
As we previously reported, it is not only the concerns of what this could do to many of the produce suppliers who work with Kroger, but the precedent it could set for the buy-side industry.
“By this action, they have opened the door for other retailers to violate supplier rights protected by law. Our industry should not and will not stand for attacks like this,” George said. “The fresh produce industry has been a good partner to Kroger, we hope they will remember that partnership and fix the mess they’ve created. Kroger must withdraw this threatening proposal.”
With much potentially at stake for our industry, AndNowUKnow will continue to report as this story develops.