Is the expansion of GSCOP's remit enough?
The NFU has questioned whether it was enough for the CMA to expand the remit of the Groceries Supply Code of Practice (GSCOP) only to add Ocado and B&M to the existing list of 10 designated retailers. While this change is to be welcomed, given that it further protects suppliers and goes towards a more level playing field, I agree that this is not enough.
Fundamentally, GSCOP was introduced to protect grocery suppliers from unfair business practices which arose as a result of the overly dominant market position held by the UK’s major retailers (Asda, the Co-op, Marks & Spencer, Morrisons, J Sainsbury’s, Tesco, Waitrose, Aldi, Iceland Foods and Lidl) prior to 2010. These practices had stifled supplier competition and innovation and the prosperity of the grocery sector suffered as a result.
Following GSCOP’s imposition on these designated retailers, things have improved as supplier/buyer relationships have rebalanced, largely because of the successful work by the GCA, Christine Tacon. In my recent experience, however, suppliers are still being subjected to the unfair buying practices of the past by businesses who are not traditional supermarkets but who, as a result of their success and the general state of the UK market, have achieved comparative buying power.
This is of no surprise; the market changes and people move jobs. In terms of change, retailers are not buying the volume of different products as they once did, consumers want to buy groceries more regularly, often online, and in smaller quantities at cheaper prices and more for reasons of health and quality. Consumers also now eat out more often.
In the case of online shopping, this has resulted in the rise of Ocado with Amazon also rapidly gaining ground. Grocery sales by non-supermarket high street businesses have risen. Wholesalers have also benefitted as their customer restaurant chains have expanded, making them more important customers of food & drink suppliers, many of whom also sell to designated retailers. Above all, these new or expanding businesses have gained buying power (many may now have a grocery related turnover that exceeds the £1 billion GSCOP threshold) and need competent buyers who have the experience of meeting the growing demands on their business.
Designated retailers know GSCOP inside out because they are obliged to ensure their buyers receive mandatory annual training on GSCOP. Inevitably, those buyers move jobs and it is now not just competing retailers that could poach them, but also these new or expanding grocery buying businesses. The result is that, working for these businesses, experienced buyers know they are not affected by GSCOP, know that their competitors are affected, and have the option to resort back to unfair practices in order to exploit the competitive position their businesses occupy, which leads to the situation I have seen.
Suppliers are overall now in a far better position than they were before the imposition of GSCOP, insofar as a large portion of grocery buying businesses (through the designated retailers) are covered GSCOP. But the changes to the market warrant more regulatory change than simply expanding the affected retailers by two – there are more businesses in the grocery sector who should be considered. Given the present state and uncertain future of the economy, if the grocery sector is to prosper, our suppliers and effective competition need to be protected more than ever before.