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Monday Evening Lecture: Supermarket Code
Grocery Code Adjudicator Christine Tacon
Supermarket regulation
The Club’s latest Monday Evening Lecture heard from Grocery Code Adjudicator Christine Tacon. Charles Abel reports
06 • The Farmers Club Spring 2020 SUPERVISING fair play in the food chain is not for the faint-hearted. But after seven years as the UK’s Grocery Code Adjudicator Club member Christine Tacon has shown what tenacity, industry expertise and a readiness to grapple with the nitty-gritty can achieve.
Amusingly, in her first year, Grocer magazine featured a cartoon of the new adjudicator as a shark with teeth bared. A similar cartoon appeared a little later – with ‘Tesco’ in the shark’s jaws! But is punishment the answer to curbing supermarket abuses?
The legally binding Code stipulates how designated retailers must treat their direct suppliers, and the Groceries Code Adjudicator Act gives significant powers of investigation and enforcement, including fines of up to 1% of turnover, in a sector worth over £100bn annually. Today 13 retailers deal with 1000s of direct suppliers, some big enough to look after themselves, but many not.
Bullying retailers
“Supermarkets can take advantage of their power, making it the suppliers’ problem if the weather changes, a customer complains, or even if the supermarket gets their order wrong. This bullying behaviour can build up and lead to situations like I found at Tesco when I investigated.”
The Code had existed for three years before Christine’s tenure, without much impact. Several notable cases show how Christine’s approach has veered away from ‘investigation and punishment’, towards ‘collaboration and enhanced efficiency’. The results have been significant.
Collaboration for efficiency
“I’m a production engineer, I love efficiency, making systems work better,” Christine explained. “Bad practice is inefficient. It takes up time and energy. I wanted to be measured by how things have improved for suppliers, not the size of the fines.”
The notorious Tesco investigation in 2015 is a case in point. It found the retailer was in breach of the Code, not paying in full, and not paying on time. Some suppliers were paid up to a year late, others were charged twice for promotions. Mistakes were taking months to correct, during which the retailer held onto millions of pounds. Suppliers could do nothing about it.
The investigation took a year, damaged Tesco’s reputation and cost it millions. At the time the adjudicator had no powers to fine, so Tesco was given a list of required changes and it took them 6 months to prove it was paying on time and correcting mistakes quickly.
More recently the Co-op was found to be in breach, cutting the stores that suppliers were stocked in without reasonable notice, and
introducing charges, such as £10/case for a depot rejection, again without fair notice. “You will appreciate a supplier with a fixed price contract for a year cannot have new charges imposed at six weeks’ notice.”
A fine could have been imposed, but wasn’t. “I required Co-op to make significant changes to their governance, oversight, processes and training and they have now demonstrated to me they have done this.” But the investigation still took a year, plus nine months for Co-op to implement changes to the adjudicator’s satisfaction, all with significant costs.
“The Tesco investigation was a success – for me, for suppliers and for Tesco. But in nearly seven years I have done two investigations. I think the answer is collaboration, focusing on encouragement and reward. There needed to be a culture change so supermarkets put things right themselves.”
Supplier feedback vital
Rather than waiting for nervous suppliers to report abuses, Christine went looking, listening at industry events and talking to suppliers, privately and confidentially. “Supplier feedback is the oxygen I need to do my job. I read between the lines to build a picture of what is going on – in real time. And I tell the supermarkets the general themes of what I am hearing.”
Compliance Officers at the retailers are key people. They are excluded from the buying chain,
and are generally lawyers, audit or finance people. Using a blame-free approach the issues are examined and solutions sought – soon. “I do expect them to put it right and will escalate it to the top if it is not.”
It seems to work, changing how supermarkets do business. Morrisons, for example, was heard to be asking suppliers for money to continue supplying. “I told the retailer’s CEO, David Potts. It stopped overnight. An internal investigation looked at millions of emails and money was paid back.” Such case studies can be faster than an investigation and drive learning. Five have been published so far.
Annual survey trump card
The real trump card though is the Annual Supplier Survey. Six have been done so far, highlighting which retailers have improved, how they rank against each other, and where there is still work to do around specific practices.
It has driven change. In 2014 the suppliers ranked retailers from 58% to 90% for Code compliance. In last year’s survey, with 1500 responses, only two retailers scored below 90%. “Every single major issue that suppliers have made me aware of has improved,” says Christine, who ends her second period as GCA in June.
Supermarkets are recognising Code compliance aids efficiency, and may help explain why the retailers which top the survey are also doing well commercially. Aldi topped all six surveys. Suppliers also say the approach has made it a less unfair playing field. “The sweet spot has been retailers realising it is more efficient to sort problems identified by suppliers – it costs all parties less.”
Professionalism may be improving, and moving up the supply chain, but will the Code extend beyond direct suppliers – to farmers? Direct suppliers already have written contracts now, but many farmers do not, for example. More is needed, Christine accepted, and attempts are being made to address this in the Agriculture Bill and European Directive on Unfair Trading Practices.
APRIL MONDAY EVENING LECTURE The next Monday Evening Lecture is on Monday 6th April, from 5:30-7:30pm. All members and their guests are welcome. Full details of the speaker will be announced soon – see the Secretary’s e-newsletter, the Club Noticeboard, Facebook and Twitter.
