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Kroger to Drop Net 90 Payment Terms for Produce Suppliers

Kroger to Drop Net 90 Payment Terms for Produce Suppliers

SACRAMENTO, CA - Kroger has announced it will not require produce suppliers protected under PACA to participate in Net 90 payment terms. After asking its produce suppliers to waive their PACA rights and agree to 90-day payment terms in late June, which, at the time, the retailer said “was not considered optional,” Kroger has reneged in a new letter obtained by ANUK.

Signed by Matt Hodge, Sr. Manager, Enterprise Sourcing Finance at Kroger, the letter states that, “For those PACA-eligible produce suppliers who are interested, [Kroger] will continue to negotiate for payment terms that are permitted within their PACA Trust rights.” The letter was addressed directly to Judith Wey Rudman, Director of USDA’s PACA Division.

Matt Hodge, Sr. Manager, Enterprise Sourcing Finance, Kroger“Our produce suppliers received a letter outlining our recently-modernized payment terms and supply chain finance opportunity. We’ve shared with individual produce suppliers that we will respect existing contractual and legal mandates including PACA. We never intended for PACA-eligible produce suppliers to waive their PACA Trust rights,” Hodge wrote in the letter. “At the same time, we’ve welcomed and listened to feedback from our produce suppliers and other important stakeholders—including yours. I’d like to take this opportunity to clearly state that produce suppliers protected under PACA are not required to participate in Net 90 payment terms.”

I discussed the new revelations with Matt McInerney, Sr. Executive Vice President of the Western Growers Association.

Matt McInerney, Senior Executive VP, Western Growers“My hat is off to Kroger and its response to suppliers before the implementation of the policy, set to take place August 1st. Western Growers is very pleased and appreciative of Kroger listening to its produce suppliers and having a respectful conversation,” he shared with me. “At the end of the day, PACA trust rights are never negotiable, and they should always be retained. This was a positive outcome, and we extend our thanks to Kroger for doing the right thing.”

California Fresh Fruit Association’s President George Radanovich released a statement following Kroger’s announcement that echoed many of McInerney’s sentiments.

George Radanovich, President, California Fresh Fruit Association“We appreciate Kroger’s acknowledgement that the ‘Net 90’ payment plan didn’t work for the produce industry. We stand by our position that Kroger’s original push to implement its plan was wrong and 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 was unconscionable and should never have been proposed,” he said, commending the fresh produce industry for being “a unified voice” on an important issue.

Radanovich concluded, “As I’ve stated before, the fresh produce industry has been a good partner to Kroger; we appreciate that Kroger remembered that partnership and fixed the mess it created.”

AndNowUKnow will be continuing to discuss the change in policy with the produce industry in the coming weeks, so stay tuned for more reporting.