Musgrave GB has now confirmed to Budgens retailers that the price rebate will be phased out.
Retailers have warned that the move could put a number of store owners out of business, with one describing it as “the ultimate violation of trust”.
In a letter to retailers seen by C-Store, which recently broke the story, managing director Peter Ridler said the business was in “turnaround mode”.
He added: “This means there are aspects of our operations that have to change and this includes changing the way we invest in media and improving retailer margins, while gradually phasing out the need for the price rebate over the next couple of years.
“This latter change will not be popular with some, but we’re doing it because we need an approach where the whole brand benefits and every retailer gains equally from being part of this partnership. It’s unfortunate that elements of our discussions around this issue have been leaked to the media.”
One prominent Budgens retailer said: “I fail to see why, as an independent who has run my business as tightly, efficiently and effectively as possible for several years, I should now have to dip my hand in my pocket to pay for head office mismanagement. I feel stabbed in the back.”
BACKGROUND: THE KVI REBATE
Budgens retailers had seven different price zones they could use for individual categories, based on factors such as location and competition.
Tesco Price Match was introduced to help retailers, but it moved prices into different zones and Musgrave took control of pricing. Subsequently retailers were compensated after auditors calculated a matrix for Tesco Price Matching and how much retailers were losing.
“Budgens is no longer doing Tesco Price Match, but we still have no control over our price file. We should be able to go back to zoning,” said one retailer.
“We’re testing all of our plans at our laboratory store in Broadstone, where early results are encouraging with a 20% uplift in sales since relaunch in October. This is the future I want to see for every Budgens retailer and there is more of this to come in 2015. We will also continue to develop own brand, ramp up our marketing spend while improving customer-facing technology, logistics and availability.”
Musgrave GB md Peter Ridler, in a letter to Budgens retailers