The industry waits with bated breath to see if the forthcoming Queen’s speech contains proposals for a Grocery Code Adjudicator.
The competitive structure of British grocery helps consumers by reducing the cost of food, widening choice and mitigating food inflation. However, concentration of buying power has created much commercial angst among suppliers and producers.
For producers of food commodities, changes in global supply, demand and currency arguably affect price most significantly. Within categories, factors like an excess of processing capacity or readily available imports dilute margins. Little of this can be addressed by regulation.
There are five key questions facing the Bill: How will anonymity work in practice? In most categories, the supply base usually comprises a small number of ‘core’ suppliers who produce volume lines supplemented by other suppliers, typically smaller and more specialist. If malpractice is reported, realistically how will anonymity be preserved?
Who will be able to complain to the Adjudicator? Would a farming group supplying a processor be eligible, or only a supermarket’s direct suppliers? Third parties are hugely affected by supplier and retailer interactions. From a producer perspective, will commercial buying by the food production and foodservice sectors be included in the scope?
What will the Adjudicator’s powers be? The government believes in the Adjudicator’s bark in being able to publicise wrongdoing, but what of its bite in terms of levying penalties?
What of the unintended consequences? It could be commercially dangerous for a producer or supplier to report a large supermarket to the Adjudicator. Also, will it be less likely that multinational fmcg giants cry foul than other, smaller suppliers? The legislation - targeted at ‘big companies’ - could end up being used by smaller suppliers to report smaller supermarkets.
Finally, how does the Adjudicator fit into the overall regulatory framework for the industry? The lines of demarcation between the FSA, OFT and GSCOP need to be clarified. There is plenty yet to debate.