Groceries Code issues follow downward trend

The number of suppliers experiencing Groceries Code-related issues continues to fall, groceries code adjudicator Christine Tacon told her office's third annual conference last Monday (27 June).

Tacon: regulated retailers have acted on issues raised - image: HW
Tacon: regulated retailers have acted on issues raised - image: HW

According to the YouGov survey carried out for the adjudicator and unveiled at the event, 62 per cent of direct suppliers said they had experienced an issue in the past year, compared with 70 per cent in 2015 and 79 per cent in 2014.

Suppliers rated Aldi, Sainsbury's and Lidl as most compliant with the code over the previous 12 months, while 65 per cent of those supplying Tesco, the subject of an adjudicator investigation that concluded in January (HW, 26 January), said its practices had improved, compared with five per cent reporting they had worsened.

This was mirrored in an overall YouGov rating of "change in retailer practice" that put Tesco as most improved, while Asda, which saw the largest increase in issues raised by suppliers, came bottom. It was also the only retailer to slip back in a rating of overall compliance with the code, in which Aldi once again came top.

"All the regulated retailers have acted on the issues I have raised over the past year and there have been some excellent examples of changes in retailer practice," said Tacon.

The top issues experienced by suppliers were incorrect deductions from invoices with or without notice, excessive retailer charges for artwork or design and a lack of compensation or the imposition of penalty charges for inaccurate forecasting, the survey found.

It also recorded an increase in the number of direct suppliers undertaking training in the code - from 29 per cent to 35 per cent - following an adjudicator campaign, while suppliers also said they are now more able to contact the retailers' mandatory code compliance officers. But there was no change in the proportion of direct suppliers prepared to bring information to the adjudicator, with more than half citing fear of damaging relations with the retailer.

"I am disappointed that the number of suppliers saying they would bring an issue to me remains stubbornly on 47 per cent," said Tacon. "This is despite the publicity around the Tesco investigation and a clear demonstration that I can carry out a complex investigation with significant findings and benefits for suppliers with no identities being revealed."

Among indirect suppliers, however, the proportion who said they would raise issues with the adjudicator rose from 41 to 62 per cent, while among trade associations this figure went up from 64 to 77 per cent. Smaller suppliers were also more likely to report than large ones. Suppliers also reported an increase in the use of written agreements with all but one of the 10 retailers covered by the code, with more than half of relationships now covered by such an agreement.

Conducted between March and May this year, the survey drew responses from 921 direct suppliers, 105 indirect suppliers and 44 trade associations, with fresh produce the fifth-largest sector by number of responses.

Based on the survey findings, her investigation into Tesco and other information received, Tacon said she has identified five key issues that will be the focus of her work in the coming year. On one of these - payments for better positioning of goods - she has launched a formal consultation lasting until 19 September. Such practices uncovered between Tesco and its suppliers "have the potential to adversely affect competition", she said. The other four key issues are delays in payments; margin maintenance; artwork and design services; and "pay to stay" deals.

The adjudicator levied £2m for the 10 largest grocery retailers to fund the office over the past year. Tacon said she "welcomes the statutory review (due later this year) of the adjudicator's effectiveness in performing statutory functions and ensuring that the role is still required". In March the Government suggested that it was unwilling to extend the adjudicator's role, despite pressures from other sectors and parts of the supply chain.

Meanwhile, an adjudicator probe into alleged demands by Morrisons last year for lump sums from suppliers, apparently outside the terms of the code, led to the retailer conducting an internal investigation and "taking disciplinary action where appropriate", said the adjudicator's office.

"The adjudicator has been assured that additional training, more robust internal processes and increased audits are now in place", it concluded, adding that as a result "the issue would be treated as a case study rather than meriting investigation".

Morrisons chief executive David Potts said: "These events happened a year ago and since then much has been achieved to ensure they don't happen again. All of our new ways of working with suppliers have been shared with the adjudicator."

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