Ruth Mason, Chief Food Chain Adviser gives an overview of the Grocery Code Adjudicator’s (GCA) investigation into Tesco and explains what this means for Tesco suppliers and producers.
In 2013, after a decade of NFU lobbying, the GCA was set up to oversee and govern the Groceries Supply Code of Practice (GSCOP). GSCOP sets out requirements which regulate the supermarkets’ relationships with their direct suppliers to ensure that they are not subject to unfair practices. Such requirements include fair and lawful dealing, with good faith and giving reasonable notice to vary supply agreements.
This week we have seen the GCA, Christine Tacon, make her biggest announcement since her appointment as adjudicator. The results from her investigation into Tesco have shown that, in a number of cases, Tesco has breached GSCOP.
The GCA revealed that delay in payments by Tesco to its suppliers was a widespread issue. In particular, she found extensive evidence that Tesco had deducted and deferred payment of money owed to suppliers for goods supplied. Even where Tesco acknowledged that a debt was owed to its suppliers, the GCA found that, on occasion, repayment took over 12 months. She concluded that these breaches were caused by a number of factors, including incorrect data inputting onto Tesco’s systems, duplicate invoicing and payments to maintain margin targets set by Tesco commercial teams, to name a few. The GCA also identified that commercial teams at Tesco failed to respond in a timely fashion to challenges from suppliers.
In my view, delays in payments and unilateral deductions will have had a significant effect on direct suppliers to Tesco; particularly those smaller businesses with less capital behind them. Although the effects on the farming supply base cannot be directly measured, the NFU believes that this pressure will have been pushed all the way back to farm. The practices employed by Tesco do not have any part to play in fair and transparent relationships.
Tesco has written to the NFU to set out the actions it has taken to improve its practices and to rebuild trust with its suppliers. This includes simplifying commercial models and creating an independent supplier protector line.
We will scrutinise these and work with the GCA to ensure these commitments are upheld. I know that many members will be weary of commitments that are not followed up by genuine and meaningful action.
The GCA has played a vital role in uncovering this ill practice and we will support the continued efforts to make changes to retail buying behaviour. In addition, we will continue to lobby for fair, safe and secure food chains which are based on sustainable business partnerships. Within the fierce competition in the retail sector, this is more important than ever.