B2B Engagement

Morrisons, Asda and Iceland have been tagged as the grocers who treat their suppliers the worst among the UK’s 10 major chains, according to a report by the industry watchdog.

A fifth of Morrisons’ suppliers told the Groceries Code Adjudicator (GCA), Christine Tacon, that the supermarket rarely or never complied with the industry rule book compared with 2% for the best performing supermarket, Aldi.

The findings come after it emerged last week that Morrisons had been forced to refund money to suppliers after it was found to have sought cash lump sums of £2m or more from them to support its profits in defiance of the groceries code.

The GCA has the power to fine supermarkets up to 1% of their turnover if they do not comply with the code, but Tacon said Morrisons did not need to pay up because it had responded swiftly to her concerns.

However, supermarkets were told Tacon would be doubling the levy she charges the 10 big companies covered by the code to £2m this year in order to fund a potential investigation.

For the first time, the retailers will also have to pay a bigger proportion of the levy if they are involved in the key issues she will be examining in the coming year.

The key issues to be investigated are: charges for artwork and design services; delays in payment; margin maintenance; “pay to stay” arrangements in which fees are demanded for new supply contracts; and payments for better shelf or store positioning.

Tacon has launched a formal consultation into payments for better positioning of goods, the last of those five key issues, after her first formal investigation – into practices at Tesco – was published in January.

“During my investigation into Tesco I found areas of concern about the issue of payments for better positioning or increased share of shelf space,” she said.

“I came across instances where a Tesco request for investment resulted in the supplier asking for share of shelf space commitments, product placement near competitors and exclusivity. Such arrangements appear to have the potential to have an adverse effect on competition through retailer acceptance of large sums of money from suppliers in exchange for better positioning or increased shelf space.”

The consultation is open for 12 weeks until 19 September. Tacon said she was disappointed that the number of suppliers saying they would bring an issue to her remained stubbornly low at 47%. More than half of those questioned said they would avoid approaching the regulator because they feared damaging relations with a retailer.

“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 revealed,” she said.

“In the coming year I will be redoubling my efforts to overcome this fear factor and also to reach suppliers overseas where knowledge of the GCA remains low.”

According to the YouGov survey carried out on behalf of the GCA, 62% of direct suppliers said they had experienced an issue in the past year – compared with 70% in 2015 and 79% in 2014.

Suppliers rated Aldi, Sainsbury’s and Lidl as the top three supermarkets in terms of complying “consistently well” and “mostly” with the code during the previous 12 months.

Morrisons was the worst, preceded by Iceland and Asda, where 19% of suppliers said they rarely or never complied with the code. Suppliers labelled Asda as the supermarket where behaviour had worsened the most in the past year. Nearly a quarter of its suppliers who were questioned said Asda’s compliance with the industry code had worsened.

Direct suppliers also told YouGov that most retailers had improved their behaviour in the past year, with the highest performer identified as Tesco: 65% of those supplying the chain said its practices had improved and only 5% reported a deterioration.

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