November 1, 2011

Sri Lanka's Fonterra stop supplying amid discount issues

Fonterra's Sri Lanka unit has halted supplying dairy products to the Food City supermarket chain after traders' complaints on discounts given by the retailer.

Cargills officials were not available for comment but a senior official at Fonterra Brands Lanka confirmed the move, saying it was in response to protests from traders, including those near Cargills supermarkets.

"We supply not only to Cargills supermarkets but to 40,000 outlets," said Fonterra Brands Lanka sales director Dilhan Jayawardena.

"Cargills is one of them and they are very important and by not having the product we know it's having an impact on customers.

"The issue is Cargills was reducing INR25-30 (US$0.51-0.61) from the retail price. We did not say anything at first but then we were inundated with letters from the retail trade saying they were being undercut and their livelihoods were affected."

The INR25-30 (US$0.51-0.61) discounts offered by Food City were particularly hurting retail stores around the supermarkets.

Protest letters had been received from traders in different parts of the island where the listed Cargills group has supermarkets.

Jayawardena said Fonterra Lanka had asked Cargills to sell its dairy products based on the maximum retail price.

Customers said supermarkets operated by the Cargills group had put up notices that Fonterra had withdrawn dairy brands like Anchor owing to a dispute over discounts given by the chain."We also like consumers to benefit (from lower prices) but there should be a standard way of managing the trade," he said. "From our side, we are ever willing to deliver."