Ideology overrules honesty: Mataffären – KF
A Swedish language explanation can be found at the end of the English below. The two texts are not the same.
This leader editorial article from SVD, Sweden’s leading daily newspaper appeared on January 7, 2009. Below is further details.
http://www.svd.se/opinion/ledarsidan/artikel_2285131.svd
http://gudmundson.blogspot.com/2009/01/sjlv-fredrar-jag-grnstedts-monopol.html
Sweden takes pride in leading the world in business and government honesty. According to Transparency International, Sweden is in the top 3 countries along with Denmark and New Zealand http://www.transparency.org/policy_research/surveys_indices/cpi/2008.
I have worked in Hong Kong, China, Germany, USA, Australia, New Zealand and done business with a United Nations range of business people over the past 20 years. Once I was asked for a bribe (by a French department store buyer) and working in China in the 1990s I was conscious of the absence of the rule of law but also different negotiating styles and attitudes to contracts.
Australia sits just below Sweden on the Transparency International ranking and I have been comfortable doing business here with most counter parts being open, straight forward and usually overly honest in what they say during negotiations. Doing business in Sweden was, I thought, living up to its reputation.
Then I had the misfortune to enter into business relationships with one of Sweden’s largest retailers, KF, which made me realise that KF cares more about the trees it plants in Africa every year than the paper the contracts it enters into are written on. Contracts for KF are not something to be honored.
This is my story of untransparent Sweden where the rule of law and contracts can mean nothing. As a former business journalist I always take notes during meetings so my recollection of events of the disastrous and distasteful KFN affair is based upon my notes taken during these meetings and directly after.
In the second half of 2007 I approached KF to discuss possible marketing opportunities. Towards the end of the year their business development manager said that he would like us to talk to the head of a new business they were very excited about. Combining food with quality wine was a part of their new approach to attracting new up-market customers.
In January 2008 after many months of negotiations, my company signed a very important two year exclusive contract with KF Näthandel AB, a subsidiary of the giant retail cooperative KF (www.kf.se). The agreement allowed Antipodes Premium Wines Ltd to market quality wine to the customers of the new online grocery store Mataffaren.se and for Mataffären to deliver all wine orders from our company in Stockholm and for us to market Mataffären’s service to Australian Wine Club’s 26.000 members.
This contract was important for our company as it gave us a large number of new customers and centralised our delivery logistics in Stockholm at a competitive price. Our business plan and budget for the year was based around the new customers from this marketing relationship. So we invested significant amounts of money and time in to it as well as put off other marketing opportunities to focus on the KFN relationship.
Only wine over 90kr was to be marketed and no beer or spirits or bag in box products. Quality wine fitted well with the high level, expensive products Mataffären sold through its website to well-off Stockholmers. Its target market was NOT the typical Konsum/KF customer, they said. One of the reasons KF stated it wanted to open Mataffären was to appeal to a new more affluent customer and help change KF’s reputation which is not as fresh and modern as ICA or Sabis or VI, its competitors.
KF is a member cooperative which has its foundations in the Folkrörelser (popular national movement) and is an important part of the socialist ideology which has underpinned Swedish society since the second world war. KF is one of Sweden’s largest retailers with Konsum and Coop grocery stores throughout the country as well as a range of other retail chains and real estate interests under its control. It is owned by its 3 million members so its senior executives are not as profit motivated as its nearest competitors and it seems, not as concerned with the finer details of contract law either.
In March 2008 Mataffären started to deliver wine to customers of Australian Wine Club (www.australianwineclub.se) and in April Mataffären started its own grocery delivery business. AWC marketed Mataffären’s service to its members and Mataffären made special email offers to Mataffären’s customers. Mataffären’s branded vans and uniformed drivers were happily delivering wine to hundreds of AWC customers in Stockholm from March to August 2008 without any problems.
KFN believed that by offering quality wine to their customers it would create a strong competitive advantage over their competitors and that many customers would be attracted by the wine subscription service and buy food to go with the wine when the order was ready for delivery. Therefore they wanted to launch Mataffären Wine club at the same time as their big advertising campaign in the end of August. My company worked through the whole of the summer to build a website specially for Mataffären and our two ordering systems were to be integrated. Below is the link to the website we built for them.http://site3607.linux.globaldial.com/mainwebsite_html/site_13/
At the end of July I was contacted by the Scandinavian correspondent for the Financial Times and asked to do an interview. I asked the Managing Director of KFN if it was ok to mention our cooperation agreement as it had been operational for 4 months and we were only a month away from a big media launch. Permission was granted and the interview proceeded. Below is the article which resulted from the interview. http://www.ft.com/cms/s/0/dfda57ec-61a7-11dd-af94-000077b07658.html?nclick_check=1
Swedish media picked up on the story and Mataffären was not media shy and made the most of it to promote their company with the major Swedish print, TV and radio media. The publicity they received was extreme and gave a good boost to the Mataffären business. http://site3607.linux.globaldial.com/mainwebsite_html/site_1/document_uploads/KF_utmanar_Systembolaget.pdf
On August 18, 3 days before our new website was to go live, I was summonsed to meet with Pär Jansson (par.jansson@kf.se), the chairman of KFN and a senior KF executive. Pär, who told me he is friendly with Anitra Steen, the CEO of Systembolaget and wife of former Social Democratic Prime Minister Göran Persson, informed us that they have decided to terminate our contract without any cause. And we had to find a new company to deliver all our wine orders within 2 weeks. He had already spoken to the company that delivered their groceries and they were willing to take on our business directly. So it seemed that we were not the first to know that our contract was going to be terminated.
Pär said he and the CEO of KF, Lars Idermark, had approved the contract they signed with us and had spent a lot of time discussing the implications of the agreement beforehand. He said he and Lars had also made the decision to terminate our contract. The reason Pär gave for cancelling the contract was that “their 3 million members did not want KF to sell alcohol”. The fact that KF was not selling alcohol (they were marketing it) and it was only relatively expensive wine (wine over 90kr a bottle is only 6% of the Swedish market) had no influence on how seriously they took the criticisms of a small number of their members.
Pär said he knew that our agreement to market wine with direct delivery, thereby avoiding any dealings with Systembolaget, was legal but he and Lars did not think that it would be perceived as competing with Systembolaget, which is what their members most disagreed with. It is a worry that two senior executives of one of Sweden’s largest retail companies can be so unaware of the perceptions and concerns of their members/shareholders.
My analysis of the reason for the termination is that KF received pressure from their political friends.
Pär said that I should meet with the MD of KFN and discuss compensation. Pär had not sought any legal advice before the termination meeting and when we held the first compensation meeting they still had not wondered what their legal position was. No compensation was offered at this meeting and nor was it offered at a subsequent meeting I had with Pär in his office at Slussen, south of Stockholm. By this meeting Pär had met his lawyers because in the absence of their own offer, I submitted my own. I was insulted that they did not take our contract seriously and thought that they could tear it up and hope we would just go away. To get their attention we were advised by our lawyers to submit a carefully calculated compensation claim based upon the lost profits of the two year contract. As we knew the expected sales figures of Mataffären and their own expectations for the wine sales, this was not difficult to calculate.
Pär thought otherwise. Using bullying tactics, he told me that KF would only pay compensation for what we had spent on implementing the contract. Our legal right is to claim lost profits as well as direct costs. It was clear from the negotiations that he had no legal reason to terminate the contract and was also inclined not to pay compensation as it would only bolster our company which directly competes with Systembolaget. As we had budgeted for the profits generated from the contract it was our moral and legal right to recoup the lost profits from KFN.
I was told by KFN that if I pushed for compensation KF would shut down KFN and we would get no compensation.
A final meeting was held with Pär and his lawyer where we were told that they are going to sue us and we can expect no compensation.
It is easy to be a bully when you work for a huge company that is not accountable to its shareholders for profits the same way a publicly listed company is and one that has strong political connections.
So Pär thought he would push us around, show the Australian businessman that there are two sets of rules in Sweden and they played by their rules which were above the law. (I am also a Swedish citizen).
Our lawyer advised that we had an open and shut case of breach of contract and termination of a contract without cause. We had a 99% chance of winning significant damages from KFN if we took them to arbitration.
I was faced with two options: invest a lot of time and money to take our case to arbitration or keep on growing our business, selling a lot of wine and keeping our thousands of customers happy. The compensation case would take 12 months and cost at least 1 million sek. Our business is growing extremely fast and requires all my attention nearly 24/7 so we decided to put the compensation claim to one side for now and keep our business growing and growing. The compensation claim is valid for many more years to come and we will wait until the time is right to proceed with it.
KFN has never:
offered any compensation
given a reason for terminating the contract
Pär Jansson and Lars Idermark entered into a contract which they later discovered did not have the support of their 3 million members and/or their political friends. Instead of admitting that they made a mistake and act honorably with a reasonable compensation offer, they decided to bully and threaten a small company which only days before was their trusted partner.
One day we will take this case to arbitration and claim what is legally ours but for now we cannot focus on the negative or the past. We must continue to give the best service and sell the best quality and value wines to our large number of customers.
And, I of course encourage those of you who believe that Sweden should maintain its high level of business and political ethics and transparency to stop buying from KF shops. You will feel good about supporting good business ethics in Sweden!
Please email your friends and give them a link to this page and encourage them to spend their hard earned money at stores that practice good business ethics.
Cheers
Mark Majzner
Below is a description in Swedish of the conflict between KFN and APW.
För valfrihet bland vin
http://www.svd.se/opinion/ledarsidan/artikel_2285131.svd
I juni 2007 fick Klas Rosengren rätt i EU-domstolen mot den svenska regeringen i vad som sedermera blev känt som Rosengren-beslutet. Det innebar att privatpersoner i Sverige med omedelbar verkan fick importera alkohol från andra EU-länder, även om de använder ett separat eller så kallat tredjepart transportföretag. Sverige ändrade sina lagar i enighet med EU-domstolens beslut i juli 2008.
De praktiska konsekvenserna av Rosengren-beslutet blev:
- Det är lagligt för privatpersoner (inte företag) att köpa alkohol från ett annat EU-land och att en tredjepartsleverantör transporterar varorna till köparen i Sverige.
- Alla skatter som gäller för alkohol som köps i Sverige måste betalas även vid privatimport. I det fall privatpersonen själv arrangerar transporten är privatpersonen skattskyldig, men om det är ett företag utomlands som både säljer dryckerna och arrangerar transporten (så kallad distansförsäljning) är det distansförsäljaren som är skattskyldig i Sverige. Detta inkluderar alkoholskatt och moms.
- Privatpersonen måste vara över 20 år gammal.
- Alkoholen måste levereras från ett EU-land och kan inte lagras på ett lager i Sverige.
- Transaktionen får inte äga rum i Sverige (betalningen ska göras med och genom ett icke-svenskt företag, till exempel genom en webbsida baserad utanför Sverige).
Antipodes Premium Wines AB har sedan 2004 varit Sveriges ledande vinklubbsoperatör. Australian Wine Club är den största vinklubben med över 26 000 medlemmar runt om i landet. Innan Rosengren-beslutet marknadsförde Antipodes sitt vin genom www.australianwineclub.se men sålde det genom Systembolaget, som då tog en del av försäljningsmarginalen.
I och med lagförändringen kunde Antipodes snabbt erbjuda sina medlemmar valmöjligheten att antingen köpa vinet från Systembolaget eller direkt från webbsidan med hemleverans, utan mellanhänder.
I december 2007 etablerade Antipodes sig på Malta (Antipodes Premium Wines Ltd), startade lagerverksamhet i Tyskland med det globala transportföretaget Schenker och registrerade sig som distansförsäljare av alkohol hos Skatteverket. Hemleverans började erbjudas till Stockholm, Göteborg, Malmö, Lund, Uppsala och Helsingborg, och resten av landet fick leverans med Bussgods till ett lokalt ombud för hämtning.
I slutet av januari skedde den första storskaliga och lagliga leveransen av vin till privatpersoner i Sverige.
Kunder kan beställa vinet från www.australianwineclub.se, betala online och få det direktlevererat. Priset inkluderar alla skatter men en leveransavgift tillkommer. APW betalar skatten direkt till Skatteverket.
Australian Wine Club säljer endast kvalitetsvin i butelj i prisklassen 90-200 kr+. Vi köper vinet från små producenter runt om i världen, däribland Australien, Nya Zeeland, Sydafrika, Frankrike, Tyskland, Spanien och Italien.
APW erbjuder en helt laglig service av högsta kvalitet som är mycket uppskattad av personer som är intresserade av kvalitetsvin i Sverige. Etablerade krafter jobbar för att hindra vinkonsumenters valfrihet och för att skada APW som företag.
APW har vuxit kraftigt sedan starten 2004 genom att arbeta tillsammans med etablerade företag och deras varumärken och genom att erbjuda deras kunder en ny och unik service
