The debate over an industry ombudsman to monitor retailer-supplier relationships continued to rage this week, as National Farmers’ Union (NFU) president Peter Kendall launched a scathing attack on Tesco ceo Sir Terry Leahy’s suggestion that the move may lead to an increase in food prices.
Addressing the NFU’s annual conference in Birmingham, Kendall called for a strengthened code and an independent ombudsman. He questioned the major retailers’ stance on the issue after Sir Terry clarified his opposition to the proposal at the City Food Lecture at the end of last month.
Kendall said: “The Competition Commission’s investigation into the grocery market has once again pointed to poor behaviour in the supply chain. Those with the power pass on the risk, keep the margin and take it off the farmers. Not only does this damage farmers, but the commission also concluded that it was not in the long-term interest of consumers either.
“We support the Competition Commission’s conclusion that there needs to be a strengthened code and an independent ombudsman. [Research] demonstrates that those remedies are likely to benefit consumers through higher investment, greater availability and more choice.
“So my heart bleeds when retailers attack the proposed remedies as unnecessary regulation that will put up consumer prices, as I heard Sir Terry try to do at the recent City Food Lecture. I am just as opposed to unnecessary regulation as Sir Terry. But when there is proven abuse and the voluntary approach has been tried, tested and has failed, that tells me legislation is required.
“And when they speak of higher prices, the retailers can’t seriously be talking about the 0.005 per cent of turnover that an ombudsman would cost; they can only be thinking that in the future, they won’t be able to cut prices and increase their margins at our expense.”
Kendall also urged DEFRA secretary of state Hilary Benn to back the farming community on the issue.
He told FPJ: “What the retailers are saying is that in a time of recession, anything that potentially puts up food prices will be catastrophic, but our point is that all the work Professor Roger Clarke of Cardiff Business School has done proves this is not the case.
“We continue to work with the government to put pressure on the retailers to put an ombudsman and strengthened code in place independently, and then we have to stick to the regulatory alternative. We are absolutely convinced we will need this legislation, because it is not working at the moment, particularly in horticulture. There is some outrageous behaviour going on.
“The fact [the retailers] can come back and take some money off us and say ‘actually we paid you too much last year and we will pay you less this year’ - how does that allow a farmer to plan?
“They have said to some suppliers ‘we are changing 30 per cent of your product to low-value or value lines’ and the fact they can suddenly do that, knowing you have grown it for their traditional high-spec lines... does not allow farmers to plan. It is taking money retrospectively.”
Tesco is not the only major retailer to have opposed the proposed ombudsman. Others have also cited cost as a barrier, including Waitrose managing director Mark Price.
At the conference, he defended Waitrose’s stance against paying for an ombudsman. He said: “What we are saying is that the charge should be in line with usage. We have a four per cent market share and have not had any complaints made against us. We just can’t accept that we have as much effect and control on the market as, say, a 30 per cent player does, so why should it be pro rata rather than based on something like the number of complaints against us?”
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