Enforcing fairer buying practice

A code of practice could protect ornamentals growers from buyers' tough purchasing practices, says Gavin McEwan.

The growing interest among corporate players in the garden retail market has raised fears among suppliers of a coming change in culture - in particular concerning buying practices.

Already facing flat or falling prices for their plants, protected ornamentals suppliers fear that as corporates play a bigger role in the market, tougher buying practices such as unfavourable changes in payment terms at short notice could become common.

One grower, speaking on condition of anonymity, says: "We need a code of practice. We're easy meat for the big guys - they can de-list you tomorrow morning. Everyone is scared of speaking out."

The Office of Fair Trading earlier referred the issue of edibles supply for investigation by the Competition Commission (CC), which delivered its findings in October last year. This stated: "We have concerns about the effect of practices carried out by grocery retailers that transfer risks and increase costs to suppliers on future levels of investment and innovation."

At the same time, the CC invited proposals to remedy the failings it had found. To support this, the NFU has seized on a code of practice as the best way to protect the interests of ornamental growers.

According to NFU horticulture adviser Dr Chris Hartfield: "Everyone is aware of bad buying practices going on, which is why there was the investigation, and why there's a need to strengthen the existing Supermarket Code of Practice (SCoP). As it stands, the code hasn't had sufficient teeth."

In its report and recommendations, the CC was guided by the interests of consumers rather than producers. "But we believe that a healthy supply chain is in their interest, and that bad practices will have an impact on the final customer," says Hartfield.

Currently, the SCoP covers the big four supermarkets only. The NFU has proposed that in addition to it being strengthened, it should be applied to all retailers, including DIY chains and garden centres.

Yet a statutory instrument had never been the NFU's main aim. "We'd have preferred originally to have a voluntary code, but when the buyers wouldn't sign up to it we were left with no option," says Hartfield. "Now we have an opportunity to include pot plants and cut flowers there too."

He explains the case for bringing ornamentals under such a strengthened code: "There's a lot of similarity between edible produce, pot plants and cut flowers. They're very different sorts of products from tins of paint - they need to look their best at a specific time when they're delivered.

"If the retailer doesn't follow through on an order, the producer can't then sell (the products) again in six months' time. The retailer either has to offload them cheaply or write them off completely."

The NFU's proposals were submitted to the CC in November. A CC representative explains: "We are expecting to publish a provisional decision on remedies in early February. Our provisional decision will set out the remedial action we intend to take, as well as the reasons for that action, and will serve as the CC's response to the points raised in the various responses to our notice of possible remedies."

Meanwhile, the NFU is also pursuing another option. Although a voluntary code for edibles supply was never agreed on, Hartfield is optimistic that such a code can be achieved for ornamentals.

"There's a need for clear, more rigorous arrangements between producers and buyers - that's the tenor of the (draft) voluntary code of practice and the route we'd like to go down," he says.

Hartfield suggests more thorough written agreements between buyer and seller allow problems to be dealt with in time. "If you make sure everything is agreed in advance, you don't then get retrospective demands," he explains.

Typical among such demands are the notices beginning "Following a run of poor sales... ", seeking lower-than-agreed payments, and calls for free stock to supply new stores. "The SCoP as it stands hasn't prevented these," he comments. "Over the next few months we will meet with major retailers to explain the voluntary code of practice to them. The two are happening in tandem - we're hedging our bets."

The voluntary code has been developed over the past six months in partnership with the British Protected Ornamentals Association (BPOA), a specialist branch of the NFU.

BPOA chairman Phil Austin says: "We have already begun talking to retailers. A lot of our members deal with the supermarkets, so they are in constant dialogue anyway. There's no point in going down the road of something that turns out to be unfeasible. But we're hopeful that this will bring about a change for the better."

He adds, though, that existing contracts between retailers and their suppliers would have to run their course before any new code could come into play.

New Garden Centre Association (GCA) chairman Martin Davies has welcomed the proposals for strengthening agreements, believing that unsustainable buying practices can only shrink the pool of growers able to supply the independent garden centres, which make up the GCA membership.

"We don't want the industry to shrink, which is what will happen as savvy retailers squeeze prices further," he points out. "So far the industry has been fairly well self-regulated. The GCA respects growers' need to make a decent profit. And there are always new entrants to offer buyers an alternative."

Growers' fears of what the future holds were typified by Wyevale's demand in November for across-the-board cuts in prices paid to suppliers in exchange for higher volumes. Meanwhile, one large DIY retailer has been known to respond to a weekend of poor weather by cancelling the next weekend's plant order.

But a Wyevale representative says: "Wye-vale is quite a big business, but it has tried to be as considerate as possible, especially to smaller plant suppliers. Around 250 of them remained on a 60-day payment cycle rather than 90-day, when Wyevale revised its payment terms a year ago."

He adds: "To bring in the serious gardener you have to have a quality product - that's part of the appeal of garden centres - and working with small suppliers is the only way to maintain an advantage over the likes of B&Q."

COMPETITION COMMISSION PROPOSALS

While calling for proposals from other bodies, the Competition Commission has made its own suggestions to improve relations between retailers and suppliers, including:

- Lowering the threshold above which retailers are included within the SCoP;

- Improving the SCoP's "visibility of compliance or non-compliance";

- Changing the institutional arrangements for monitoring and enforcing the SCoP.

In response, the NFU's proposals include:

- Creating an ombudsman, with independent offices and staff, to oversee relations between retailers and their suppliers, and initiate investigations;

- Extending the SCoP to cover not only all supermarkets irrespective of size, but also other retailers including convenience stores and garden centres;

- Extending the SCoP to cover pot plants and cut flowers.


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