The Queen is expected to announce that there will be a Groceries Supply Code Adjudicator in her speech to the House of Lords on Wednesday, a move which will be watched closely across the food industry.
At present the Office of Fair Trading (OFT) is responsible for the Groceries Supply Code of Practice, brought in after a Competition Commission recommendation in 2008. The code investigates supplier complaints regarding grocers with a turnover of £1bn or more - a remit that includes the top 10 supermarket chains.
Now, however, that responsibility is expected to lie with the adjudicator, which is to occupy a desk within the OFT
The British Retail Consortium argues that there is no need for an adjudicator because the OFT already has the same remit. It argues that the cost of having an adjudicator - charged to retailers – would erode the already thin margins that grocers work on and potentially end up costing consumers more for some products.
The government has estimated the cost at £1m – clearly a fraction of the larger grocer’s turnover – but the BRC argues that the draft bill is vague and thus the costs could be far more.
Deeper and more detailed investigations could cost more time and money and prove onerous for retailers.
Liberal Democrat MP Andrew George, who has carried the fight for suppliers as chair of the Grocery Market Action Group, claims the major grocers use a number of bully-boy tactics to intimidate suppliers and leverage their power in the supply chain.
These include changing contract terms at the last minute, asking for promotional funds retrospectively, demanding using certain hauliers and paying for product too late, according to George.
The tenacious nature of supermarket negotiations was laid bare in 2010 when it was revealed Asda had issued an internal memo advising buyers to use a ‘good cop/bad cop’ tactic to get the most out of suppliers.
But retailers have rejected their reputation as big businesses bullying smaller suppliers, arguing that they are supplied by big brands such as Kraft and Mars.
And all of the major grocers have attempted to get closer to suppliers and growers in the last few years as a weak pound has made the UK unattractive for international exporters, and Tesco, Asda, Sainsbury’s and Morrisons have all made efforts to firm up security of supply.
And with the rise in popularity of Fairtrade and ethically sourced products among their customers, grocers are paying more attention than ever to how their products are sourced.
Realistically the new groceries adjudicator will only be effective if suppliers are guaranteed complete anonymity when they complain about retailers. George recommends that a third party – such as the National Farms Union or the British Independent Fruit Growers Association – collects information and feeds it back to the adjudicator.
However, BRC director of food and sustainability Andrew Opie told Retail Week that making the claims anonymous would be near impossible in some categories, such as carrots, because there are so few operators that the identity of the supplier would be obvious to the retailer. This means that the request for information from the adjudicator might have to be broadened out to a range of categories to protect anonymisty - costing retailers more money and time.
“Our main concerns are around business burdens for retailers and that they have the right of appeal,” said Opie. “We do not have a problem with disputes as long as the process is fair.”
Ultimately, a partnership approach is needed to allow both retailers and suppliers to make effective business models. An adjudicator could be in place as early as next year if the legislative process moves quickly. However that will be far from the end of the matter.