Supermarkets want to shift up to 100% of losses from Russian attacks onto producers - media
The largest Ukrainian grocery chains have begun reviewing contracts with suppliers after Russian strikes on warehouses and distribution centers. Novus, "Silpo" and "Fora" propose that manufacturers bear half the cost of destroyed goods, while ATB essentially shifts the entire risk onto suppliers.
As reported by "Ekonomichna Pravda", after the August attacks, manufacturers received letters from ATB, Novus, "Silpo" and "Fora" with additional agreements to current contracts. The chains justify the changes by saying they need to distribute war risks between the parties.
Under the current model, after delivery of products to a warehouse or distribution center, ownership transfers to the retailer. At the same time, the manufacturer usually receives payment only 30–50 days after shipment.
ATB wants to shift all risk to the supplier
Novus, "Silpo" and "Fora" propose a 50/50 model: if goods are destroyed or damaged due to a strike on a warehouse, the chain may not pay the supplier half of its value.
ATB proposed a stricter model. Its supplementary agreement states that in the event of destruction of products, ownership will be considered not transferred to the retailer. Thus, the entire financial loss remains with the manufacturer.
According to the publication, suppliers also worry that refusing the new terms could lead to termination of cooperation with certain chains.
ATB denies that this is an ultimatum. The company called the supplementary agreement a subject of negotiation and stated that it is looking for a "balanced model" of distributing extraordinary risks between retailers and suppliers. The company also said it is ready to discuss payment terms, purchase prices and marketing conditions.
Producers have not yet agreed
As of publication time, according to "Ekonomichna Pravda", no manufacturer has agreed to the described conditions. Industry associations advise companies not to sign such contracts, arguing that the manufacturer cannot control risks of goods already transferred to the chain and located on its premises.
In addition, suppliers are offered to rebuild logistics and deliver products directly to stores bypassing damaged distribution centers. At the same time, according to producer representatives, fines for underdelivery, retro bonuses, other payments and long payment terms may remain.
Losses may be passed into prices
Producers do not predict an immediate rise in food prices due to the new contracts. However, if suppliers have to cover losses of already produced and delivered goods to retailers, these costs may later be factored into selling prices.
For companies with small financial reserves, repeated product loss could mean production cuts. The industry warns that in that case the consequence for consumers could be both price increases and reduced assortment.
Producers have already raised this issue in meetings with government and the President's Office, proposing to legislatively regulate relations with retail, including creating a compensation mechanism for products destroyed at distribution centers. No concrete solution has been announced yet.
