Small suppliers stick to a code of silence

The food and grocery supply code may embolden larger suppliers to speak out against unfairness in supermarket conduct, but will it help small and family-sized businesses?

The recently released food and grocery supply code is good news for small and family businesses. But none of the family businesses approached by Business Spectator were willing to go on the record about their experiences with Coles and Woolworths. This reticence comes from a fear that speaking out will impair their future dealings.

Of the thousands of businesses that supply these two retailers, the vast majority are small and medium-sized. These are the ones who have been dominated by the retailers.

The large Australian and international suppliers may have teams of lawyers and may be more able to hold their own against the retail giants. But it’s yet to be seen if this code will give smaller producers the help they need.

Gary Dawson, chief executive of the Australian Food and Grocery Council, says when the code comes into action in around six months, suppliers can be more confident.

And even before the document passes the regulatory impact assessment and is tabled in parliament as a regulation under the Competition and Consumer Act, Dawson says it’s still useful as a reference point.

“This is a useful document for suppliers to have a look at and reference in their negotiations as a guide to what’s reasonable and what’s not,” he says.

“A small, particularly family, supplier’s CEO is deeply embedded in the business – he lives and breathes it – and so doesn’t have a whole lot of awareness as to whether what he’s experiencing is a problem right across the industry or if it’s just a problem for him.”

Small Business Minister Bruce Billson says he’s given Coles and Woolworths “plenty of encouragement” in drafting this code.

“It’s an important first step in redressing the enormous imbalance and some of the more egregious conduct that has been reported and that we’re aware of,” says Billson.

Without doubt, this is the first piece of good news that suppliers to Coles and Woolworths have heard in a long time. But if you’re one of them, don’t head into their head offices with a copy of this code in hand, expecting a vastly better deal just yet.

“We’re hoping that this might enable a bit less of the onslaught and a bit more sensible collaboration by setting out some clearer ‘no-go’ areas,” Dawson says.

Some of those no-go areas are the basic right of the suppliers to be paid on time, not be stuck with costs for in-store wastage and shrinkage, not be forced to pay for better shelf positions and not be dropped at a moment’s notice.

Some family business owners have gone so far as to say that Coles and Woolworths are “swine” to deal with.

Many of these suppliers are envious of the United Kingdom’s mandatory version of the grocery supply code, introduced earlier this year.

Supermarkets in the UK can be given financial sanctions and can face being publicly named and shamed if they break the rules.

Gary Dawson was quick to defend the Australian version as having more relevant terms and providing faster relief to suppliers.

“Where there’s a real point of difference is the section on retailer’s ‘own brands’, which doesn’t appear in the UK version,” he says.

“And we’ve gone significantly beyond that and our commitments around intellectual property, protection of confidentiality, restrictions of retailers demanding exclusivity, and commercial principles around shelf space allocation.”

The UK code also took 10 years to put together, according to Dawson.

When asked if this code is an admission that Coles has mistreated its suppliers, Robert Hadler, managing director of corporate affairs at Coles, replied:

“Absolutely not. Coles has always had to abide by the law. What this code does is actually go above the law and put in place additional prescriptions to give suppliers greater transparency and certainty in their dealings with supermarkets.

“To some extent it’s going forward by looking in the rear-view. But we’re confident that it will improve our relationships and reduce disputes going forward.”

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles