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Asda, the supermarket chain, is sticking by a 12-week notice period to start the delisting of the entire output, valued at 40 million pounds per annum, of the Erith-based Ferndale Foods, it,s primary ready meal supplier.
This is in spite of requests from Ferndale’s management, and from the Office of Fair Trading (OFT) to go to mediation, and to suspend the delisting decision while this is in process. Ferndale believes that a longer and more reasonable notice period will allow it to find alternative customers and so protect the jobs of its 600 employees.
James Logan, Ferndale’s Managing Director, said: “We were surprised because there was no price tender and at the time we were assured we had done nothing wrong”.
However, whilst Asda has eventually agreed to go to mediation (some five weeks after the OFT’s request), it has still not agreed to do this under the Supermarket Code of Practice nor has it agreed to the OFT’s request to suspend simultaneously the delisting notice, without which any mediation will be valueless, as the business will be lost before the process starts.
Mr Logan said: “This is a clear case of shutting the stable door after the horse has bolted.”
As a result of the uncertainty, Ferndale’s management issued their staff with consultation notices, in contemplation of wholesale redundancies over the next few weeks, and the closure of its chilled ready meals facility.
Asda is currently locked in a legal wrangle with the OFT and is trying to prove that the Code, which requires Asda to be both reasonable and to act in good faith, does not apply. “At the moment there appears to be a lack of reasonableness and good faith. This is the Code’s first real test, but its regulator appears to be powerless in enforcing the spirit of it on Asda,” Mr Logan said. “After two months of analysis, the OFT still has not formally decided whether a delisting of £40m of business (to start after 12 weeks notice) even comes under the Code, let alone in getting Asda to suspend its decision pending mediation. But if this doesn’t come under the Code, what does?”
“It appears that a business that, since 1996, has been the primary supplier of chilled ready meals to a major UK supermarket,and has invested millions of pounds in its production plant so it can offer in excess of 90 product lines, and grown its workforce to 600 in a designated economically-deprived area, can be threatened with seeing it all disappear without any protection. In our view, the Code is flawed and the regulator is too weak to enforce the spirit of it,” he added.
There has been much discussion in the food industry about the effectiveness of the Supermarket Code. The OFT’s audit of the Code earlier this year concluded that it appeared to be working effectively.
Bexley Council has expressed its concern at the news of large-scale redundancies at Ferndale Foods, following the company’s loss of a contract to supply Asda stores.
Ferndale Foods is one of the largest employers in Thamesmead, and is understood to employ many people local to the area.
Asda appears to have given only 12-weeks notice of its decision to de-list the company as a supplier. This notice period does not give Ferndale enough time to find other customers to keep production going at or near the current levels.
Bexley Council has written to the UK President of Asda Stores to urge re-consideration of its decision and, in particular, the short notice given to Ferndale.
The Leader of the Council, Cllr Chris Ball, comments: “We are very concerned at the number of jobs that will be lost, and I would like to offer my sympathy to those facing redundancy. We are hoping to work with the company to help those affected.
“Regrettably, there seems to be an issue over whether Asda has entered into the spirit of the Supermarket Code of Practice,” adds Cllr Ball. “The Code, which is regulated by the Office of Fair Trading, seeks to address the imbalance of power between large supermarket chains and their smaller suppliers.”
Staff facing the loss of their jobs at Ferndale Foods in Thamesmead, are to be offered an intensive programme of support to help them find alternative employment.
Last week, the company accepted an offer from Bexley Council to arrange a customised package of support for up to 500 staff.
The 500 employees were served with redundancy notices last week, following supermarket chain Asda’s decision to remove the company from its list of suppliers.
During the six-week programme, the staff affected will be offered help searching for new jobs and preparing CVs, along with advice on learning and training opportunities, at the company’s premises on the Hailey Road Business Park.
The Council’s Resources Team will provide the bulk of the help. The cost will be met by the company and Bexley Council.
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