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Automatically translated version. May contain inaccuracies compared to the original.
Large retail chains sent manufacturers addenda to the so-called risk-sharing mechanism: in case of destruction or damage to products at distribution centers, suppliers will not receive half of their value. The letters were sent to manufacturers after a series of Russian strikes on warehouses in early August. Manufacturers took several weeks to sign, and industry associations twice tried to reach the authorities, but meetings in the government and the Office of the President yielded no result. Companies fear that agreement by at least one supplier will become an argument for networks in negotiations with the rest, and all future losses will ultimately be passed on to consumers through higher prices.
Under existing agreements between retailers and manufacturers, ownership of the goods transfers to the network immediately after shipment to a distribution center or warehouse. Settlements are not instantaneous: the payment deferral rule applies, and the manufacturer receives money only after 30-50 days from the shipment date. If funds are needed immediately, the supplier is paid with a discount of 3-5%, which retailers call factoring. It turns out that at the moment of the strike the manufacturer had already paid for the raw materials, produced and delivered the goods, but had not yet received payment for them.
Currently, Silpo and Fora demand that, in case of full or partial destruction of goods, the supplier bears material responsibility on equal terms with retailers — 50 on 50. The mechanism in all three networks is approximately the same:
if the goods are destroyed, the retailer simply does not return half of the deferred payment;
in Fora, additionally offer replacing destroyed goods with new ones at favorable prices;
the terms apply not only to full but also to partial damage of products;
refusal to sign the addendum threatens termination of cooperation with the network.
Retailers had proposed compensating half the cost of destroyed goods even before the August strikes, said Arsen Didur, executive director of the Milk Producers Association (SMPU).
"Some agreed, some refused — it was clear that this did not have commercial force," said Arsen Didur, executive director of SMPU.
According to him, retailers have now decided to make these terms mandatory for all suppliers.
"We are also your partners and are doing everything possible to deliver to you both at the DC and in stores. But if something happens at our enterprise, we do not shift the risks onto you," said Arsen Didur.
The authorities could not intervene in the dispute between retailers and manufacturers.
Immediately after receiving the letters, manufacturers appealed to industry associations to press the authorities. In mid-August, a meeting between the leadership of the Ministry of Agrarian Policy and the Ministry of Economy with SMPU, the Union of Poultry Farmers, and the Retailers Association took place, but representatives of the supermarkets stated that they did not want to debate with the industry and would only communicate with individual manufacturers. SMPU recommended to its members not to sign the contracts because the liability described in them does not align with the transfer of ownership of goods already on the retailer's premises.
A second attempt occurred at the end of last week in the Office of the President with Deputy Head of the Office Oleksiy Sobolev, Minister of Agrarian Policy Taras Visotsky, and Minister of Economy Oleksandr Kravchenko. Manufacturers proposed changing the legislation to regulate relations with retailers and provide for compensation for products destroyed at distribution centers. The retailers’ reaction was sharp.
"Retailers began shouting that such things do not exist, that they are hearing about it for the first time, that such addenda do not exist, and that they will no longer hold such meetings," a source told the newspaper Ekonomichna pravda.
According to available information, so far no manufacturer has agreed to the new terms. SMPU says they do not track who among participants signed or refused the agreements, since contracts with networks contain a confidentiality clause and penalties. The availability of goods on shelves will not yet be affected by signing addenda, since product availability primarily depends on logistics. The risk is different: if a network terminates contracts with those who refused to sign, replacing major players will be difficult.
Earlier, Informator reported that retailers are moving to smaller hubs instead of large distribution centers to reduce risk from repeated attacks. The Ukrainian Retailers Association emphasizes that there is no systemic product shortage, but local supply disruptions are already being recorded, especially in the fresh products category. We also wrote that strikes on retail warehouses will lead to a deficit of trucks, as networks are massively shifting to smaller transport for delivering goods instead of large trucks. The most damaging attack is considered the night of 5 August, when ten warehouse facilities in Kyiv region were damaged.
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