Small businesses have accused healthcare retailer Holland & Barrett of squeezing suppliers by demanding they contribute to the retailer’s expansion plans.

In a letter sent earlier this month, the retailer said that it was asking for a decrease of at least 5% in supplier costs to contribute to its recovery following a difficult 2015 and in the anticipation that 2016 will be “even more challenging”.  

As a separate measure, Holland & Barrett said that suppliers would have to cover the costs of a £3 million investment in security tagging and CCTV to combat product theft.

David Sables, founder of suppliers’ advice group Sentinel Management Consultants, commented: “I'm not completely surprised by this. It's reminiscent of the type of behaviour we used to see before the Grocery Code of Practice was introduced."

"It's difficult for the smaller suppliers to know how to react because there's a lot at stake. Quite often it's a negotiating tactic, but you have to know how to respond and deal with it.”

In a statement, Holland and Barrett said: "We have made significant investments over recent years to drive the growth of the brand, including a major increase to both our UK and overseas store numbers and investments in both staff training and ecommerce technologies including click and collect.
"Naturally, suppliers benefit from the resultant increase in sales this growth brings, as well as customer and brand reach.

"This latest initiative is not the start of a negotiation process but a further part of this growth strategy which we are now in the process of communicating to our suppliers."

Earlier this month, sources said that the chain’s private equity owner Carlyle is considering a possible sale of Holland & Barrett, with an auction possible in the near future. A decision is expected before the summer.