"50 at 50" for destroyed goods: large chains force manufacturers to pay for the consequences of Russian strikes

"50 at 50" for destroyed goods: large chains force manufacturers to pay for the consequences of Russian strikes

Large retail chains have sent manufacturers additional agreements about a so‑called risk‑sharing mechanism: in the event products are destroyed or damaged at distribution centers, suppliers will receive only half of their value.

The letters were sent to manufacturers after a series of Russian strikes on warehouses in early August. Manufacturers have delayed signing for several weeks, and industry associations twice tried to reach the authorities, but meetings at the government and the Office of the President produced no result. Companies fear that the consent of even one supplier will become an argument for the chains in negotiations with the rest, and that all future losses will ultimately be passed on to consumers through higher prices.

This was reported by Informator.

Under current contracts between retailers and manufacturers, ownership of the goods transfers to the chain immediately after shipment to the distribution center or warehouse. Payments are not instantaneous: a payment deferral rule applies, and the manufacturer receives money only after 30-50 days from the shipping date. If funds are needed immediately, the supplier can get them with a discount of 3-5%, which retailers call early financing. As a result, at the time of a strike the manufacturer has already paid for raw materials, produced and delivered the goods, but has not yet received payment.

Currently "Silpo" and "Fora" are demanding that in the case of full or partial destruction of goods the supplier bear financial responsibility on equal terms with the retailers — "50 at 50." The mechanism is roughly the same across all three chains:

if the goods are destroyed, the retailer simply withholds half of the deferred payment amount;

in "Fora" they additionally offer to replace destroyed goods with new ones at preferential prices;

the terms apply not only to complete but also to partial damage to products;

refusal to sign the additional agreement threatens termination of cooperation with the chain.

Chains proposed compensating half the value of destroyed goods even before the August strikes, said Arsen Didur, executive director of the Union of Dairy Enterprises (UDU).

"Some agreed, some refused — they saw that it has no commercial force," said Arsen Didur, executive director of the Union of Dairy Enterprises Arsen Didur.

According to him, retailers have now decided to make these terms mandatory for all suppliers.

"We are your partners too and do everything possible to deliver to your distribution centers and stores. But if our enterprise gets hit, we don’t shift those risks onto you," Arsen Didur said.

The authorities could not intervene in the dispute between retail and manufacturers

Immediately after receiving the letters, manufacturers appealed to industry associations to get the authorities involved. In mid‑August there was a meeting between the leadership of the Ministry of Agrarian Policy and the Ministry of Economy with the UDU, the Poultry Union and the Retailers Association, but supermarket representatives said they did not want to discuss with the industry and would speak only with individual manufacturers. The UDU recommended its members not to sign the agreements because the liability written into them does not align with the transfer of ownership of goods that are already on the retailer’s premises.

A second attempt took place at the end of last week at the Office of the President with Deputy Head of the OP Oleksii Sobolev, Minister of Agrarian Policy Taras Vysotskyi and Minister of Economy Oleksandr Kravchenko participating. Manufacturers proposed changing legislation to regulate relations with retail and provide compensation for products destroyed at distribution centers. The chains' reaction was sharp.

"Retailers started shouting that there is no such thing, that they are hearing about this for the first time, that such additional agreements do not exist, and that they will no longer hold such meetings," a source told Ekonomichna Pravda.

According to available information, so far no manufacturer has agreed to the new terms. The UDU says it does not track who among its members has signed or refused the agreements, since contracts with the chains contain a confidentiality clause and penalty sanctions. Signing additional agreements will not yet affect shelf stock, because product availability depends primarily on logistics. The risk is different: if a chain terminates contracts with those who refuse to sign, it will be difficult to replace large players.