Australian Food and Grocery Council
Australian Food and Grocery Council
FOOD AND GROCERY
VOLUNTARY INDUSTRY CODE
OF CONDUCT
Australian Food and Grocery Council
AGENDA
• Overview of the Australian grocery market
• Retail pressure
• Grocery inquiry’s
• Existing Codes and Global Experieince
• Food and Grocery Code of Conduct
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Australian Food and Grocery Council
OVERVIEW OF THE AUSTRALIAN MARKET
• Australia is the second most concentrated retail environment globally
• Coles and Woolworths market share in excess 78%
• Retailers have enormous buyer power, even against large suppliers
• Trading terms lack transparency, rebates and retrospective claims are
common place, often imposed
• Reward and risk along the supply chain is weighted in favour of retail
• Suppliers are nervous of retaliation
• Retailers own brands are growing ~ 25%, access to market being
restricted.
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Australian Food and Grocery Council
WHY THE FOCUS ON THIS SECTOR?
• Economically important sector
• Direct importance to Consumers
• High proportion of market in hands of a few
• Relative imbalance between retailers and (most) suppliers
• BUT food prices falling
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Australian Food and Grocery Council
MARKET CONCENTRATION, SHARE AND MARGIN
EBIT Margin through time.
Source; Company Reports, CiTi Research 2012.
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Australian Food and Grocery Council
GROCERY INQUIRY’S
• 2011
The impact of supermarket pricing decisions on the dairy
industry.
• 2008
Report into the competitiveness of retail prices for standard
groceries.
• 2007
Examination of the prices paid to farmers for livestock and
the prices paid by Australian Consumer for red meat.
• 2002
Prices paid to suppliers by retailers in the Australian grocer
industry.
NB: ACCC investigation into unconscionable conduct and misuse
of market power currently underway.
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Australian Food and Grocery Council
GOVERNMENT CONCERN
“There is a widespread series of allegations ... concerning the
misuse of market power by the major retail chains in this country who
now are able to control some 80 per cent of the retail food sales, we
have heard many times that these are strategies that really are
aimed at protecting consumer rights (but) they are not - they're about
protecting supermarket profits. In practical terms, if you don't deal
with Coles or Woolworths you're out of business.” Kim Carr 2012
“The allegations raised with the ACCC, and subsequently
illuminated in our investigations to date, include allegations of some
conduct that does not conform to acceptable business practices and
may be unconscionable or a misuse of market power, Such conduct,
which is not necessarily identical across suppliers, product lines or
event supermarkets.…” Rodd Simms 2013
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Australian Food and Grocery Council
MEDIA FOCUS
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Australian Food and Grocery Council
EXISTING CODES – EFFECTIVE ?
• Produce and Grocery Industry Code of Conduct
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Voluntary
Administered by DAFF
Produce focus
Poorly utilised
AFGC previously a member (resigned 2009, NFF resigned 2011)
• Trade Practices (Horticulture Code of Conduct) Regulations 2011
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Legislated
Regulated under the Trade Practices Act 1974
Producer and wholesaler (unprocessed fruit, vegetables, nuts herbs etc)
Supported by DAFF
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Australian Food and Grocery Council
GLOBAL EXPERIENCE
In recent years, governments from around the world have acknowledged similar
marketplace trends and have identified the impacts on the supply chain.
Principles of Good Practice Document
Groceries Supply Chain Code of Practice and
Adjudication Bill
Competition Bureau (like ACCC) and Grocery Bulletin
effectively a set of principles and guidelines supported by Govt
Commerce (Code of Practice for Supermarket
Grocery Suppliers) Amendment Bill 2013
(Green’s Bill)
Other jurisdictions examining enforcement mechanisms: France, Norway,
Ireland, Italy, Germany, Hungary, Latvia, Argentina, Belgium etc.
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Australian Food and Grocery Council
FOOD & GROCERY INDUSTRY CODE OF CONDUCT
Code Intent:
Establish a level playing field by providing a framework for doing business that
respects contractual freedom, ensures competitiveness, trust and continuity.
Objects of the Code are to:
•
Require industry participants to act fairly, honestly and reasonably in their
commercial dealings,
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Supports the rights of suppliers and retailers to freely negotiate terms and
conditions of supply contracts,
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Ensure transparency and certainty in commercial transactions,
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Regulate the behaviour and deliver a cultural change in behaviour in a manner
which will allow for long term consumer benefit in terms of both grocery prices
and choice.
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Australian Food and Grocery Council
KEY PROVISIONS & OBLIGATIONS
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Application
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Contracting principles
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Variations in supply agreements, payments, changes to supply chain procedures, de-listing
practices, shrinkage, waste, product quality standards, promotions, fair dealing.
Private Label
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Simple and cost effective dispute resolution scheme.
Obligations
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Train staff (buyers/category managers), compliance officer, auditing.
Dispute resolution
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Information provision, fair trade provisions, have and maintain agreements
Compliance obligations
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Prescribed Voluntary Code, ACCC oversight, Retailers opt in
Intellectual property rights, confidentiality and transparency of range / shelf allocation.
Reciprocal Obligations
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Respect for intellectual property rights and the obligation to deal with each other lawfully and in
good faith.
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Australian Food and Grocery Council
DISPUTE RESOLUTION OPTIONS
• Code requires retailers to appoint a Compliance Manager
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Independent of retail buying team
Duty to train staff with respect to the Code
6 monthly reporting
Investigate complaints.
• Dispute Resolution Options
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Use retail dispute resolution processes through buying teams and escalation
Direct referral of complaints to retail Code Compliance Manager
Mediation / Arbitration
Direct to ACCC
– Legal applications
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Australian Food and Grocery Council
PRESCRIBED VOLUNTARY CODE
• Voluntary industry codes of conduct may be prescribed under the
Competition and Consumer Act.
• A prescribed voluntary industry code of conduct is binding only on
those members of an industry who are signatories to the code.
• A breach of a prescribed voluntary industry code of conduct is also a
breach of the Act.
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Australian Food and Grocery Council
Australian Food and Grocery Council