There’s no denying GSCOP has made a difference. Retailers take the codeseriously – even Amazon has scurried to adapt since falling under itsgovernance. It is however a very thin and vague document, which is unfit toassist suppliers in today’s inflationary marketplace and the overridingnecessity to implement cost price increases (CPIs).
Groceries Code Adjudicator Mark White, and Christine Tacon before him, find ahome for any decision they want to enforce within its vague paragraphs and theyhave constantly defended the code’s grey format. However, with no boundaries onpricing, retailers have been free to play the games they have always played.They are ignoring notifications, delaying communications, demandingunreasonable notices and requiring unnecessary proprietary information intorturously detailed CPI justifications.
This has contributed to a record high in supplier profit warnings sinceinflation has kicked in, with 69% blaming cost pressures. We must now stopdefending the code’s imperial existence as a backdrop of foggy fairness andgive suppliers a chance.
I’m firmly of the view that GSCOP now needs an Australian-style amendment to befit for purpose. The Australian ACCC Food & Grocery Code amendment becameactive from January 2021. It requires that within 30 days of being notified ofa CPI, the retailer must respond to accept, accept with change or decline. Ifnot accepted, retailers must negotiate in good faith – without delays and withthe expectation of 30 days from CPI notification to resolution.
The clock starts when the CPI is first notified, and retailers must not delaybefore engaging in meaningful negotiations. They also cannot require suppliersto disclose any commercially sensitive information.
It’s still grey of course, but the guidance is clear and, in the 16 monthssince the code update, we at Sentinel MC have monitored a noticeable easing inthe balance of power. Retailers still check that increases are rational andbased on genuine market factors, so it is important suppliers avoid blanketincreases and bring an intelligent CPI. But the speed at which these challengesplay out is much improved, and the brinksmanship of the UK is seldom witnessed.Gone are the demands for the line-by-line breakdowns that are used to delaydiscussions.
Although it’s still a challenge to see a CPI through, suppliers can be moreconfident that it will happen in good time and that their business plan won’tbe held hostage for months.
The unfairness of the situation in our market is obvious given retailers canput up their prices to shoppers at the push of a button. Tesco seems happy toimpose five weeks’ notice of an 8% rise on its logistics service withoutchallenge.
So, I have offered to help craft the relevant amendment wording for the UK anddevelop a form of amnesty for the overarching supplier agreements thatsuppliers have unwittingly entered. I’m certain this amendment would enableprices move down more easily, as well as up.
COP does not deserve unquestioned reverence. It needs scrutiny, and now.