The NFU has lashed out at the UK’s major supermarkets, accusing them of abusing their power, creating a climate of fear among suppliers, and putting supply chains at risk.
Following the Competitions Commission’s grocery market inquiry, the NFU has called on the watchdog to stop supermarket’s abuse of power, saying that many issues raised in the previous investigation in 2000 remained unresolved, and that the Supermarket Code of Practice had failed.
The organisation identified a number of examples of supermarket malpractice still taking place. This included: retailers demanding upfront payments from suppliers in the tendering or re-tendering process, sometimes running into millions of pounds; suppliers being required to pay retailers an annual payment based on a percentage of their turnover; no written terms of business in place and retailers frequently changing the verbal terms of business at short notice or in some cases retrospectively, including across the board price cuts.
It also highlighted that many suppliers were being made to pay for promotional activity in-store, only to take a lower price for their product because of that promotion; that volume or product specification changes were subject to change at short notice; and that auctions were being held to determine which company is prepared to pay the retailer the most to be able to supply them.
NFU deputy president Meurig Raymond said: “There is an obvious and very dangerous imbalance in the supply chain, that the Competition Commission really must get to grips with if serious damage to our food industry is to be avoided.”
He said the NFU revelations also highlighted the ‘climate of fear and oppression’ that exists amongst suppliers: “We have spoken to many of our members on this issue and no one was prepared to be identified in our submission to the Competition Commission because they feared that the could lose current contracts.
“This demonstrates very clearly to me the level of fear that exists and the dominance that the retailers have in the market place which creates an imbalance of negotiating strength which the retailers can, and do exploit.”
The NFU has also expressed fear that these activities, if left unchecked, will damage consumers, saying that the current pressure on the domestic supply chain is unsustainable if it is to maintain the high quality, unrivalled choice and availability of British food for consumers. “We fear if the pressure continues to be placed on suppliers, irrecoverable damage could be done to our supply chain…it cannot be in the consumer’s interest for high quality British food producers to be forced out of business by the abuse of supermarket power,” Raymond said.
“The NFU wants to see a sustainable food supply chain that offers consumers choice, high standards and good availability of food. To enable this we need a properly functioning market place that is transparent and where genuinely competitive supply chain arrangements exist.”
