Many supermarkets are now stocking local food products from SME suppliers.
This can be both a blessing and a curse to SMEs, especially if an SME becomes dependent upon one large customer where UK supermarkets have a reputation for holding SME suppliers to ransom resulting in many SMEs being left insolvent due to harsh treatment by a supermarket.
The terms, conditions and costs including promotion related fees imposed on suppliers by supermarkets have often been regarded as unfair to suppliers, which has resulted in the introduction of the Grocery Code.
It has taken more than a decade from the Code’s introduction in 2001 to the appointment of an adjudicator in 2013 and then a few more years to early this month, April 2015, to give her the powers to impose a financial penalty on offenders.
The Code only applies to the “big 10” supermarkets (Tesco, Co-op, Sainsbury’s, Marks and Spencer, Asda, Lidl, Morrisons, Aldi, Waitrose and Iceland).
It only covers the demands on suppliers to fund promotion related fees predominantly, over-ordering at promotional price, forcing suppliers to make unjustified payments to a retailer for consumer complaints, ensuring that stores only de-list suppliers for purely genuine commercial reasons, and that they give reasonable notice of and opportunity to discuss delisting with their Code Compliance Officer.
This leaves plenty of scope for more games by supermarkets and raises the question as to whether the Code’s principles can be applied in practice.
In an interview with trade magazine Supply Management in March, Christine Tacon, the grocery code adjudicator, said: “I need reasonable suspicion of a breach. Lots of anecdotes aren’t enough for me to say “I have reasonable suspicion”, and I can be taken to a judicial review if I launch an investigation without sufficient evidence.”
The Code’s tiny department will only be able to conduct up to four investigations a year and the maximum fine of 1% of annual profit will be a last resort.
It looks as though suppliers will need to collaborate with each other if complaints against a supermarket are ever to be investigated and it is likely to be a long time before any examples are made that will force a change of behaviour by supermarkets towards their suppliers.
SMEs should continue to be wary.