veg supplier supply chain fresh

Last month, the House of Commons debated the fairness of terms for farmers. It was prompted by a petition signed by over 100,000 people, who called for retailers to adhere to clear terms on fresh produce: “buy what they agreed to buy, pay what they agreed to pay, and pay on time”.

However, as many battle-weary grocery suppliers will know, this basic business premise is often not achieved by retailers. Holland & Barrett is the latest to try to change settlement terms without discussion – a decision it has just reversed.

But how do they get away with it? Surely the Grocery Supply Code of Practice (GSCOP) was put in place to prevent such tactics, and protect suppliers from the power of the retailers?

GSCOP has worked to a large extent, and some of the bad practices have reduced significantly. However, there remain three key loopholes that enable retailers to continue to wreak havoc with suppliers, resulting in financial challenges and even bankruptcy.

Firstly, we have those retailers with less than a £1bn turnover on food, who are excluded from GSCOP. These include the likes of Holland & Barrett, Boots and WH Smith Travel.

A recent Facebook post by a beleaguered drinks entrepreneur spoke of his £50k marketing investment with one such retailer that didn’t deliver the promised volumes, nor any evidence of the marketing activity promised – leaving the company on the verge of bankruptcy. The contract had a clear statement at the bottom saying there was no guarantee of any volumes, but the brand had to commit to the investment. While legally correct, it was certainly morally suspect – especially when the buyer’s forecast bore no resemblance to the sales reality.

Secondly, we have the product categories excluded from the list. That is quite a long list, from clothing to plants – and most importantly, pharmaceuticals, perfumes, cosmetics and toiletries. It means UK grocers do not have to comply on these ranges. But it also means Boots is exempt from GSCOP, despite being bigger than Iceland and Ocado put together, with a turnover of over £6bn. If we added in other fmcg products, these retailers would fall under the umbrella and suppliers would be better protected.

Finally, let us return to the issue of UK farmers. The supply of goods via intermediaries, such as processors, wholesalers and other third parties, is also excluded from GSCOP. Much of UK produce is consolidated through distributors and, as a result, they are exempt from the controls and open to more flexible commercial deals. Although the parliamentary debate was held, and a new agri-adjudicator has been promised, many fear that won’t go far enough.

GSCOP needs an overhaul so fair contracts are put in place between all retailers and suppliers – contracts that do not exploit retailer power, whether food, toiletries or any fmcg goods.

And until that happens, suppliers must be wary of buyers who promise the earth, but offer contracts that commit to nothing.