Falling out: K&N’s parts ways with Metro, Makro over price row

Published: May 22, 2012
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Annual sales of K&N’s products in Makro and Metro is around Rs200-220 million. PHOTO: FILE

Annual sales of K&N’s products in Makro and Metro is around Rs200-220 million. PHOTO: FILE

KARACHI: 

After years of successful business relationship, the largest chain of supermarkets in Pakistan, Metro and Makro – the two have merged recently – and the leading frozen food chain, K&N’s, have ended their partnership. Interestingly, each company claims that it is the one which has ceased to work with the other.

Who refused to work with who is unclear. But one thing is certain that the two have parted ways despite a highly profitable business partnership.

K&N’s has recently run advertisements in leading newspapers, declaring that its products would no longer be available on Metro and Makro stores. On its part, the supermarket chain has also placed notices in its stores with the same message.

K&N’s claims that Metro and Makro made unacceptable demands including hike in its frozen food retail prices and higher profit margins for placing its products on the store’s shelves. These demands came after the recent marriage of the two supermarket chains, it says.

However, Metro and Makro officials reject the allegations, saying these are baseless and have nothing to do with the merger.

Talking to The Express Tribune, K&N’s CEO Khalil Sattar said the food chain was being forced to raise prices of its products, pay for forced advertisements in the supermarket and supply items at reduced rates.

“We were forced to take this decision because we could not supply products at the concessions demanded as it would hurt business interests of our 1,000 retailers spread across the country,” he said.

“If we accept their demands, we will have no choice but to increase prices of our products that will neither help the customers nor the producer,” Sattar said, adding it would only boost profit margins of the supermarket chain.

Sattar also claimed that they were asked to pay Rs5 million annually for in-house advertisements on banners which was a cause for concern for the company.

“We could have considered this demand had our sales at Metro and Makro were showing an upward trend. Our sales have increased all over the country except for Metro and Makro so why should we pay more to them,” he asked.

Replying to a question, Sattar said annual sales of K&N’s products at Metro and Makro stood at around Rs200-220 million. Sharing other statistics, he said K&N’s products enjoyed a lion’s share of 65% of total sales of frozen food at Metro and Makro.

Both the figures underscore the importance of business partnership for the two companies.

Despite the expected loss in sales, K&N’s officials believe that the company can overcome the challenge with its dedicated 70 company outlets and 1,000 retailers in different cities of the country.

Commenting on the developments, a top official of Makro described the allegations as ‘unfounded’.

Metro Cash & Carry Pakistan Head of Corporate Affairs and Company Secretary Pervaiz Akhtar said K&N’s desired to “increase prices of its products so we discontinued our business operations with them”.

He said his company annually negotiated with its 700 suppliers for 20,000 products. “It is just that our deal was not finalised with them.”

Akhtar also stressed that the issue had no link with the merger of Metro and Makro. He rejected Sattar’s claim of forced buying of indoor advertising space, saying his company could not give more space to any product without paying regular dues.

Metro Cash & Carry Pakistan and Makro-Habib both are operating five stores each in Pakistan. According to officials of the two store chains, the merger deal has already been cleared by the Competition Commission of Pakistan (CCP).

(Read: Frozen food producers vie for local market)

Published in The Express Tribune, May 22nd, 2012.

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Reader Comments (12)

  • Haider H
    May 22, 2012 - 8:40AM

    K&N’s is the best brand when it comes to forzen food. My kids just love it! And it’s good to see K&N not succumbing to the pressure.

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  • Taxed
    May 22, 2012 - 12:53PM

    Rather childish on both their parts if K&N chicken has a watertight case then it should immediately go to the CCP (rather then use the press as a pressure tactic) which was created to avoid market manipulation. Makro and Metro know better not go to the press instead should have gone to the courts for defamation if K&N needs to publicly malign another company just to get a better contract. Better had been to sit down and talk like adults and come to a conclusion this is business, egos should remain out.

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  • Hamid Javaid
    May 22, 2012 - 3:21PM

    An this is because of USA and Al Qaida.

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  • cynical
    May 22, 2012 - 4:25PM

    @Hamid Javaid:
    Are you asking a Q or is this your opinion?

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  • May 22, 2012 - 4:37PM

    @Hamid Javaid:
    Childish attempt at discounting NATO/CIA atrocities.

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  • Concerned Citizen
    May 22, 2012 - 4:50PM

    SuperMarkets do force suppliers to advertise in house and give them at a much lower price it is offering nationally, so not surprised. As do not have details but I think K & N would lose out more as a single customer i.e. Metro was buying a large quantity

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  • May 22, 2012 - 6:55PM

    I appreciate K&N for keeping quality and being honest about the issue. Usually companies either increase their prices or reduce quality because of these retail monstrosities profit maximization maantra. In the end you get shoddy product. Well done K&N, it is better to buy from corner shops.

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  • hasan ansari
    May 22, 2012 - 11:53PM

    I will continue to buy K&N from other stores and please keep the prices steady.

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  • Rana A Ismail
    May 23, 2012 - 10:59AM

    Metro Stores Pakistan stopped selling our famous and reputed brand just to get maximum profit from the consumer by selling low quality brands.
    Likewise they sell spices having percentage of toxin almost double than they sell in their own country (Germany) which can cause diseases in lungs and stomach in Pakistani nation.
    We should open our eyes to check who is our friend and who is enemy.

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  • Akhtar Iqbal
    May 23, 2012 - 12:08PM

    There are examples where such stores were banned from entering a country. India didn’t allow few of such stores. K&N’s products are of international standards & my kids love the products. I shall not bargain for any other brand.

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  • Asim
    May 23, 2012 - 12:59PM

    Well, if we stop buying the low quality brands Metro will automatically stop selling them. They sell whatever is selling. Yes, Metro is at fault but so are we as consumers for keep buying cheap and toxic brands.

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  • Feisal Rahimtoola
    Jul 7, 2012 - 5:06PM

    I think Khalil Sattar did the right thing by not going along with demands of Metro but should have avoided advertising it. Most probably, despite high volume K&N did not consider bringing in another brand exclusively for Makro/Metro outlets may be an objective business decision or just fall out of egostical negotiations from both sides. I suspect the latter as I have as yet not done any rational probes.

    ( BTW we buy over 70% of our K&N product requirements directly from K&N outlets. Aghas and Time Medico account for over 60% of our other items. Price at Chase averages better than Makro/Metro)

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