The Kroger Co. says it will not enforce a new policy extending payments to 90 days for all suppliers, sparing produce companies who are covered by the Perishable Agricultural Commodities Act. ( Kroger Co. logo )

(UPDATED, 9 p.m.) The Kroger Co. has rescinded a payment schedule that would have forced produce suppliers to lose PACA trust rights by extending payment terms to 90 days.

The Net 90 mandate, announced by Kroger in letters to suppliers in mid-June, was set to go in effect Aug. 1. It was met with immediate concern and scorn by produce trade groups, shippers and anyone in the industry depending on the Perishable Agricultural Commodities Act as a remedy to recoup losses in bankruptcy and non-payment situations.

The PACA outlines a maximum payment extension of 30 days.

Judith Wey Rudman, director of the U.S. Department of Agriculture’s PACA Division’s Fair Trade Practices Program, sent Kroger a letter questioning the Net 90 policy on June 25.

In a July 9 letter responding to Rudman, Matt Hodge, Kroger’s senior manager of enterprise sourcing finance, wrote that the retailer has responded to suppliers questioning the policy.

“We’ve shared with individual produce suppliers that we will respect existing contractual and legal mandates including PACA. We never intended for PACA-eligible produce suppliers to waive their PACA Trust rights,” according to the letter.

“I’d like to take this opportunity to clearly state that produce suppliers protected under PACA are not required to participate in Net 90 payment terms,” Hodge wrote. “For those PACA-eligible produce suppliers who are interested, we will continue to negotiate for payment terms that are permitted within their PACA Trust rights.”

But according to the retailer’s original letter, there was no indication that was the case, calling for the policy to cover “all aspects” of Kroger’s business.

The produce industry responded immediately, but Kroger made no public announcement to clarify its position.

Matt McInerney, senior executive vice president for Western Growers, has fielded numerous calls on the policy.

On July 9, he complimented the industry’s response — engaging both Kroger and produce trade groups to resolve the issue — and Kroger’s decision to exempt produce suppliers, saying it handled the situation “professionally and appropriately.”

“From the industry point of view, really this is the first time in a long time the industry has unified on a particular aspect on demands from the seller side,” McInerney said July 9.

He said the major shippers that “took it upon themselves to dialogue with Kroger did a favor for the industry.”

The California Fresh Fruit Association, which release a statement in late June imploring Kroger to “fix this mess,” responded to the about-face on the policy. A July 9 statement from association President George Radanovich said the Net 90 policy was “wrong and illegal” for produce suppliers.

“We would like to commend the fresh produce industry for coming together as a unified voice for our industry,” Radanovich said in the statement. “Today we held the line on an important issue.”

He said the industry has been a good partner for Kroger, and “Kroger remembered that partnership and fixed the mess it created.”

 
Comments
Submitted by R Henry on Tue, 07/10/2018 - 11:32

Corporate hubris met its match.

Submitted by R HENRY on Tue, 07/10/2018 - 11:39

It will be interesting to observe if non-PACA protected Kroger rebel as well. If P&G, JBS, Coca-Cola and a few others refuse these ridiculous unilateral terms, Kroger will have not choice but to fold. Shame on the CEO and his minions for creating such a mess.

Submitted by Russell Costanza on Tue, 07/10/2018 - 11:51

For a family farm to have the farm’s produce on the shelf of a quality major national chain grocery is a point of farmer pride.
To grow produce that meets grade, quality specs. and chain receiving specifications for timely delivery and acceptance is expensive.
For any chain grocery selling fresh produce cash flow should not be an issue.
The consumer pays for the purchase at the CASH REGISTER. BEFORE it goes out the door!
Don’t insult the farmer saying the chain needs to increase it’s cash flow position.
You got paid at sale. And the CFO wants to hold grower payment 90 days?
A left handed ‘excuse me’ may work.
Your biggest problem now is a grower Trust was breached and doubt has his head. “They don’t want to pay me”. Instead of 90 days of paying after sale, pay the grower in 10 day terms. You got yours at sale!