Will Tesco Pay Wild Rocket’s Bills?
Jim Prevor’s Perishable Pundit, November 7, 2008
Our extensive coverage of Tesco’s Fresh & Easy operation has mostly dealt with the concept and operations. Yet our piece — Is Fresh & Easy Departing From Private Label? — brought an outpouring of anger at Tesco, the main complaint: That Tesco, which the produce vendors would like to work with, requires produce vendors to sell to Wild Rocket.
Now we had mentioned this discontent in our piece:
We continue, however, to hear of vendors who have walked away from “category captain” status with Fresh & Easy. The low volume is part of the problem but many report unhappiness not with Tesco but with Wild Rocket.
These complaints range from allegations of slow pay to clipping of bills and a failure to protect category exclusivity.
Most of the top vendors are used to working directly with retailers and find an intermediary at best an annoyance.
The financial crisis is, however, causing not so much anger as clear-eyed analytics to take over. One shipper sent this simple note:
Did you see the Blue Book rating of Wild Rocket Foods?
(86) F … Not Good.
He didn’t ask for anonymity but we’ll give it to him anyway since he might need to sell them one day.
To call a Blue Book rating of (86) F not good is a very kind way of putting it.
F is the worst pay description that the Blue Book gives. It means the company is paying its produce bills in 60+ days. (86) means that “Financial considerations and/or trade reports prohibit the reporting of a definite rating. Detailed special report available.”
Wild Rocket has not even been given a Credit Worth score or a Moral Responsibility score.
Back when the Pundit was working on Hunts Point, the Pundit Poppa would have killed him if he ever sold to a company with this kind of Blue Book rating. We wanted to deal with Blue Book Trading Members.
We also checked Wild Rocket out on Dun & Bradstreet and found a few interesting things:
First, they didn’t give D&B financial information, so it couldn’t do a complete report. Presumably this is why the Blue Book didn’t assign a Credit Worth limit as well.
Second, we notice that General Electric had filed a number of UCC (Uniform Commercial Code) filings, noting a lien against Wild Rocket’s assets. General Electric includes as security the following items:
Negotiable instruments including proceeds and products — Inventory including proceeds and products — Account(s) including proceeds and products — General intangibles(s) including proceeds and products — and OTHERS
Of course, most of this will be inventory or proceeds that are already committed by the PACA trust to produce vendors. One wonders how knowledgeable GE is about the PACA trust and if, when it comes to fully understand, it might not call its loan?
Third, we see that Tesco itself filed a UCC against Wild Rocket LLC on May 27, 2008. What were they going to use as security? Read on:
Inventory and proceeds — Accounts receivable and proceeds — Account(s) and proceeds
Once again, these are items that are virtually 100% required to satisfy the PACA trust. Wonder if Tesco fully understands the implications of the trust?
The public filings don’t tell us what led Tesco to file in May, but with volume running significantly below projections it is reasonable to think that Wild Rocket LLC may be under financial stress — thus the 60+ day payment terms. Could Tesco have stepped in to bail them out?
Now, of course, this is Wild Rocket, not Tesco. But Tesco compels produce companies to deal with Wild Rocket and Tesco is, for practical purposes, its only customer. So it seems like we would be letting Tesco off a little easy by saying that Tesco isn’t responsible for this situation.
If Wild Rocket LLC goes broke, will Tesco protect vendors? That UCC filing makes one think Tesco is trying to protect itself.
We think if it were us, we would tell Tesco that we won’t bill Wild Rocket LLC, as it doesn’t meet our credit standards. If Tesco wanted our product, the company would have to accept the billing directly and would have to pay within normal commercial terms.
Tesco should be ashamed of itself. How can it justify putting farmers in this kind of situation? Tesco is a company that preaches sustainability day and night… asking farmers to wait over 60 days for their money and making them sweat out every day whether the purchasing organization is solvent is not representative of the kind of stakeholder engagement that sustainability requires.
If Tesco doesn’t fix this, it shows that all the solar panels and polar bear photos are just green washing PR. Reprehensible.