Over half (52%) of UK food suppliers to supermarkets are unfamiliar with the Supermarket Code of Practice and even more (76%) don’t believe it offers any protection from increasing supermarket power, according to a survey* conducted by accountancy firm Grant Thornton.
Suppliers claim that the code does not encourage them to raise formal complaints against supermarkets for fear of losing their supply contracts. 19% believe the code is too vague and loosely worded, while a further 19% believe it makes no provision for minimum required contract terms.
The voluntary code was introduced by the Office of Fair Trading (OFT) in 2002 and has often been criticised for being “toothless” and ineffective when weighed against against the widespread fear of supermarket delisting. Some 63% of suppliers felt the OFT was failing to ensure fair trading practices.
Duncan Swift, head of Grant Thornton’s Food & Agribusiness Recovery Group, said: “In the most part, most supermarkets operate as any reputable business should, however, the results of the survey and, indeed our direct experience of advising food suppliers, clearly show that examples of unreasonable behaviour do go on and are putting a huge financial strain on food suppliers.”
Swift added: “What is worrying is that the code of conduct designed to protect them is hardly worth the paper it’s written on because of its ambiguous terms and the lack of effective enforcement.”
It has been two years since Asda delisted ready meals supplier Ferndale Foods with just 12 weeks’ notice, ending a £40M a year contract and putting 500 jobs at the supplier’s Thamesmead factory in jeopardy. But the OFT still hadn’t worked out whether the short-notice represented a breach of the code, said Swift. He added: “Word on the street is that it may look at it again in the autumn - some protective code this is.”
In the survey 22% of suppliers called for the introduction of a legal requirement for supermarkets to confirm key terms of trade in writing; a further 22% wanted a reduction of supermarket power; 21% want to see suppliers uniting on policy issues to better counter supermarket power; and 16% favoured the introduction of a supermarket ombudsman to regulate the industry.
See September’s Food Manufacture for further evidence of supermarket bullying.
*Grant Thornton’s UK Food supply chain survey of senior directors of 50 UK food suppliers to supermarkets was completed in mid 2007.