Supermarkets look set to face a series of crunch arbitration hearings with the Groceries Code Adjudicator, after it emerged relations between retailers and suppliers were breaking down because of the ongoing wave of cost price increase requests.
Adjudicator Mark White told The Grocer the “avalanche” of CPI requests in recent months had resulted in a series of short notice delistings across a raft of sectors, which look set to see him intervene.
It comes after today’s annual YouGov survey on behalf of the GCA showed for the first time relations between retailers and suppliers had gone backwards, with disputes over inflation at the heart of the problem.
The survey, which received more than 2,500 responses, found just over a quarter (26%) of suppliers had experienced either having retailers refuse to consider a CPI request or suffered an unreasonable delay in considering the request.
White said the “sheer scale” of the inflation crisis had led to a widespread weakening of relationships, which had remained strong during the pandemic. One in seven suppliers told the latest survey they had experienced a delisting without adequate notice, he said.
The survey of the 13 designated retailers found Aldi had returned to the top spot in the table based on suppliers’ views of its code compliance, with a score of 98% compared with 97% last year.
Meanwhile, Sainsbury’s dropped to fifth position from first, with a score of 94% compared with 98% last year.
Lidl came bottom of the pile this year, with a score of 84%, dropping from seventh (95%) last year. Morrisons came second from bottom this year, dropping from ninth, and from 94% to 86%.
Amazon’s designation under the code in March came too late for it to be included in the survey, though it has faced strong criticism from suppliers over its record of short notice delists.
While the Adjudicator does not have the power to instruct retailers on price increases, he does have the ability to act if he believes retailers haven’t given suppliers enough notice before delisting.
He told The Grocer: “The inevitable consequence of a CPI request being turned down is delisting. I’ve made it very clear that if I’m asked to determine what reasonable notice should be, I’m not constrained into what I will take into account.
“I would look back not just at the breadth and length of relationship but all facets. Around one in seven suppliers told YouGov that they had experienced delisting without proper notice and there has been a 3% increase in suppliers saying that retailers are not meeting delist requirements.”
On the number of arbitration hearings the GCA was taking up, he said: “You will have to wait until the annual report [due later in the summer] to see how many I’m in the process of conducting.
“The arbitration process is confidential. It’s not a step that suppliers take lightly because of the hypothetical fear of repercussions,” he added.
White said he believed a lack of communication from supermarkets was at the heart of the breakdown in relations, with suppliers often encountering inexperienced buyers facing a tumultuous backdrop not seen in their careers before.
“I honestly think it’s communication and the way it’s been handled,” said White, who in January issued a list of seven golden rules retailers should be following with CPIs.
Asked why he thought relationships had deteriorated since the pandemic, he said: “The retailers’ commercial strategies play a part.
“There is a conflict between growing market share, growing margin and looking at stakeholders, whereas in the pandemic the sole focus was getting the product out.”