UK grocery buyer-supplier relationships headed for eventual sea change
Buyer-supplier relationships in the UK are on the road to being strengthened and improved

UK grocery buyer-supplier relationships headed for eventual sea change

Gill McShane
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Darren A Smith_Making Business Matter
Darren Smith

Darren Smith is the author of A Complete Understanding of the Groceries Supply Code of Practice (GSCOP). He’s also a former Sainsbury’s category manager, who looked after frozen foods, chilled convenience foods and fresh produce in the late 1990s, and the founder of Making Business Matter (MBM) – a training provider to the UK grocery industry. Here, Smith talks to Produce Business UK about the outlook for buyer-supplier relationships in the UK, his reasons for writing the book and what readers could learn from it

The recent investigation and censuring of the UK’s largest supermarket operator Tesco by the Groceries Code Adjudicator (GCA) is one of a number of large milestones that is set to drive change in the UK’s grocery retail landscape over the next few years, according to Darren Smith.

“It was inevitable,” he tells PBUK. “And it will be a start [for change]. It is only going to go one way. It started in 2000 with an investigation by the [now closed] Competition Commission into the UK grocery industry. That Commission wrote a Code but it had no teeth.

“Now we have a Code [the Groceries Supply Code of Practice or GSCOP] that has teeth but no one wants to use it. This will change positively over time. People will become more aware of the Code, it will become more transparent, and people will have to abide by it. Anonymity will become better and people will become more used to talking about it.”

Smith claims many suppliers still are reluctant to use the Code because they perceive a see-saw effect. On the left, they visualise the potential gain, while on the right they anticipate potential pain.

“The pain is huge – they could be delisted [by a retailer],” points out Smith. “Those suppliers that are complaining now and going through arbitration are usually the ones who are already out of the system – they’ve been delisted. But that will change over time, and it will become easier.”

GSCOP facts

  • By law, supermarket buyers must be trained in GSCOP, while suppliers are not legally required to be trained.
  • The Code was written to help suppliers in their relationships with the major UK supermarkets.
  • 76% of suppliers do not understand the Code (Source: GCA Annual Survey 2015).
  • A Groceries Code Adjudicator (Christine Tacon) was appointed with the power to fine a supermarket up to 1% of sales.

Changing the tide

Already, Smith claims he is seeing progress. “Some suppliers are going through associations like the British Brands Group to give them a second layer of anonymity,” he comments.

But the biggest advance so far, according to Smith, lies with the top ten retailers’ Code Compliance Officers (CCO). Access their contact details here.

“Having spoken to a few CCOs when I wrote my book I found them to be more enlightened and welcoming towards suppliers, especially Steve Butts at Morrisons,” he claims. “Butts takes the approach that if a supplier approaches him with a problem he will look to solve the issue without having to necessarily use the Code. I think he’s been genuine and I hear that from a few others too.

“The CCOs are definitely people suppliers need to be aware of and buyers should be aware of them too. They could be a good gel between the two parties when things don’t go as well as they should.”

Code Compliance Officers

Meet the CCO at Waitrose
Meet the CCO at Lidl
Meet the CCO at Aldi
Meet the CCO at Iceland

Currently, only the top 10 supermarkets in the UK – Aldi, Asda, the Co-operative, Iceland, Lidl, Marks and Spencer, Morrisons, Sainsbury’s, Tesco and Waitrose – are bound by the Code. This means each retailer is required to employ a CCO and teams must be trained in the Code.

Nonetheless, Smith believes buyers from other retailers, such as convenience chains or independent outlets, should also take the time to understand GSCOP since they too are likely to be brought into the fold in the future.

“The premise [of the Code] is about providing collaboration for supermarkets and suppliers, and transparency,” he notes. “My guess is that over time these rules will become wider and stronger and they’ll affect other buyers, not only those at the top 10 supermarkets.”

Going further

In the meantime, although positive steps have been made, Smith believes retailers need to go much further in their efforts to strengthen supplier relationships. As part of the creation of the Code, he says one of the investigations carried out by the government was via independent accounting and consulting firm Grant Thornton UK to ascertain exactly what suppliers wanted.

“They [suppliers] wanted security and the confidence to invest,” Smith explains. “So that’s the crux of GSCOP – it focuses on what buyers can do to better help suppliers.”

Smith singles out long-term deals as an example of this; explaining there is more that can and should be done. “Suppliers are concerned about their business being yanked,” he points out. “GSCOP makes that a bit harder now. But how about if buyers went one step further? They could offer suppliers a tough deal but one that gives them longevity. Of course, there are some enlightened buyers already doing that.”

Smith does admit, however, that the challenge comes down to the fact that securing long-term deals is not part of what many buyers are in their jobs to do. “As a buyer you only care about the 12-18 months ahead,” he argues. “You might be in your position for 24 months but it’s not in your interest to do long-term deals.”

Bearing that in mind, Smith suggests the supermarkets need to restructure to enable buyers to offer long-term deals, and, in turn, provide what suppliers need.

“It [long-term programmes] goes against the grain,” he argues. “Typically, one of a buyer’s traits is to be ambitious, so they get bored. Meanwhile, others have been there for 20 years. There’s no one in the middle. Either buyers need to be in their jobs longer, or planning needs to be better.

“It probably comes down to a combined effort by human resources and trading directors to tackle the challenge of providing ambitious planning for buyers and suppliers’ needs. There must be an answer.”

Supplier responsibility

Of course, it takes two to tango and Smith points out that it doesn’t all come down to the retailers. “Suppliers need to be informed [about GSCOP] because if they need to make a decision they will know what to do,” he points out.

Here are three “problems” with suppliers’ understanding of the Code, as noted by Smith:

  1. Suppliers think only supermarkets should be aware of GSCOP. “Those people are living in ignorant bliss. They’ve not realised GSCOP and all of its evolutions over the last 15 years are here to help suppliers more than supermarkets. Suppliers really should understand it.”
  2. The danger of a supplier taking away pieces from GSCOP in isolation.
  3. GSCOP is only one third of what the industry needs to understand – the rest falls under the 2009 Order. “If you imagine an egg, GSCOP is the yolk and the Order is the white. There’s a whole lot more to the law.”

Smith explains that the Order covers something much wider. While GSCOP is enforced by GCA (Christine Tacon), the Order is enforced by the Competition and Markets Authority (formerly the Competition Commission). The Order is 20 pages long and GSCOP is seven pages.

“I encourage suppliers to understand both,” he says. “They’re very linked. In our industry we’ve led ourselves down a route of just understanding GSCOP – but first we need to understand the Order.”

The book

GSCOP book by Darren Smith

Given that suppliers have no legal requirement to understand GSCOP Smith hopes his reference book can help to fill the void. Indeed, he points out that 76% of direct suppliers don’t understand the Code, according to the GCA’s Annual Survey in 2015.

“This book is designed to raise awareness of the Code with suppliers, highlight the most important areas for a supplier to consider, and be used as a reference book to understand – the rules around ‘delisting’, for example – when needed,” explains Smith.

“It’s worthwhile reading for all,” Smith continues. “The metaphor I use is it’s alright not to understand the offside rule – unless you’re a footballer. In this, we are all footballers, we’re all playing the game, yet we don’t all understand the rule. We can’t put our heads in the sand. GSCOP has been around for five years already and a large percentage of suppliers don’t understand it. That’s dangerous. It’s written to protect suppliers.

“Sales Directors, Category Managers, and National Account Managers need to understand the ‘rules of the game’ that they play in, because how can they cry ‘foul play’ if they don’t know the rules?”

The book covers why GSCOP was established, how it came to life over the last 15 years, the details suppliers need to know, the pitfalls of GSCOP, why suppliers need to know the Code and how they can use it.

The overarching messages are threefold, according to Smith. “First, you should understand GSCOP and the Order; second, you might be frustrated by the Code but at least you’ll be able to make an informed choice; and third, anyone trained in the Code and the Order has an advantage over you and you want to equalise that as quickly as possible.”

There are roughly seven sections over 20 chapters:

  1. Presentations from five of the top 10 supermarkets.
  2. The history of GSCOP and the Code.
  3. Highlights of GSCOP and the Order.
  4. How to use the Code, how to go through arbitration, make a claim etc.
  5. The role of the GCA, Christine Tacon.
  6. Useful links for suppliers and buyers, including the actual Code and the Order.
  7. Case studies from the GCA to make the pieces of law within GSCOP more black and white.

The book has received a five-star rating from fresh produce industry specialist Carol Ford, who said: “This book really is a must read, not only for you but the team that are dealing with the major multiples. Clear, straightforward information that is presented in an easy to use book. Relevant links for further information, training and critically who to turn to for help. However, it is up to us in the trade to ensure that we are as well informed as our retail colleagues”.

Further materials

Do you understand the Code? Take this short video test from Christine Tacon, the Groceries Code Adjudicator.

Download the contents page of Darren Smith’s book, or a free chapter: A Potted History of the Bill, the Order and the Code.

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