GCA making progress but needs to improve awareness

The Groceries Code Adjudicator (GCA) is delivering real benefits for direct suppliers to UK supermarkets, but there is still more to do and a need to increase awareness of both the GCA and the Groceries Supply Code of Practice (CSCoP). These were two of the key messages from GCA Christine Tacon at the third GCA Annual Conference held in London at the end of June.

Much of Ms Tacon’s focus for the coming year is based on the annual survey carried out by YouGov on behalf of her office. According to this year’s survey 62% of direct suppliers said they had experienced an issue in the past year – compared to 70% in 2015 and 79% in 2014. Suppliers also rated Aldi, Sainsbury’s and Lidl as the top three supermarkets in terms of complying ‘consistently well’ and ‘mostly’ with the Code during the previous 12 months.

Direct suppliers also told YouGov that most retailers have improved their behaviour in the past year with the highest performer identified as Tesco – 65% of those supplying the retailer saying its practices had improved. However, the same question was bad news for Marks and Spencer, which showed a 1% fall in its ‘Net Improvement Score’, an indication of the number of suppliers who felt that retailer practice had improved, stayed the same, or deteriorated over the last year. The worst performing retailer was Asda which saw a 10% fall in its rating, with almost a quarter of suppliers questioned saying its practices had worsened. While there was no change in Morrisons’ behaviour, it remained near the bottom of the table.

“All the regulated retailers have acted on the issues I have raised over the past year and there have been some excellent examples of changes in retailer practice,” said Ms Tacon. “I am delighted that direct suppliers are seeing the impact of real change for their businesses. For the second year running the number of suppliers reporting Code-related issues has fallen.”

Speaking to the press before the conference she stressed that she was not being complacent but was using Tesco and Iceland as examples of what could be achieved as the two retailers had shown the greatest improvement.

“The main issue experienced by suppliers is still incorrect deductions,” explained Ms Tacon. This is covered as a delay in payment under the Code. Incorrect deductions from invoices with or without notice topped the list on 30% followed by excessive retailer charges for artwork/design (28%) and no compensation/incurring penalty charges for inaccurate forecasting (22%).

“Lump sum payments can manifest themselves in different ways, so I have split them into different issues,” she explained. As part of this the GCA has launched a consultation on payments for better positioning of goods. “During my investigation into Tesco I found areas of concern about the issue of payments for better positioning or increased share of shelf space.

“I came across instances where a Tesco request for investment resulted in the supplier asking for share of shelf space commitments, product placement near competitors and exclusivity. I also saw examples of significant payments for category captaincy and range reviews where suppliers felt that if they didn’t pay they would be adversely affected in terms of positioning on shelf.

“Such arrangements appear to have the potential to have an adverse effect on competition through retailer acceptance of large sums of money from suppliers in exchange for better positioning or increased shelf space.” The consultation is open for 12 weeks until 19 September and the responses will help the Adjudicator clarify how paragraph 12 of the Code relating to payments for better positioning should be interpreted.

The GCA’s revised top five priorities for the coming year are: charges for artwork and design services; delay in payments; margin maintenance; pay to stay arrangements and payments for better positioning.

Ms Tacon is also proposing a change to the way retailers are charged for maintaining the GCA and its activities. Until now each of the ten retailers covered by the CSCoP have paid an equal share of the total £1 million annual budget, irrespective of their size. Under the new proposals 70% of the levy will be based on a ‘business as usual’ scenario, with each retailer paying an equal amount. 20% of the levy will be based on the market share of the retailer, while the remaining 10% is determined by expected future workload. In practice Christine said that she was estimating this based on the historic workload generated by each retailer.

“I am also asking for £2 million this year,” she explained. The Tesco investigation cost £1 million and while it will be recouped, I almost ran out of cash. I have to pay the lawyer’s bills as I god, so it is a contingency fund.” She also stressed that unspent money was returned to retailers, which means that a surplus of £308,000 will be returned from last year. Overall the changes to both the budget and the formula mean that the smallest contribution by a retailer for 2016/17 will be 7.5% of the total while the largest will be 17% or £302,000. Despite the significant increase, Ms Tacon said that, “Nobody has raised any objections.”

A less satisfactory finding from the YouGov survey was the number of suppliers who said they would not raise suspected issues with the GCA. “I am disappointed that the number of suppliers saying they would bring an issue to me remains stubbornly on 47% – with more than half giving the reason as fear of their relations with a retailer being damaged,” said Christine. “This is despite the publicity around the Tesco investigation and a clear demonstration that I can carry out a complex investigation with significant findings and benefits for suppliers with no identities revealed. In the coming year I will be redoubling my efforts to overcome this fear factor and also to reach suppliers overseas where knowledge of the GCA remains low.”

After the conference the GCA held a number of workshops with direct suppliers on how to understand and use the Groceries Code.

By Richard Crowhurst.