A survey of the groceries supply chain
Stephan Shakespeare
Chief Executive Officer and Co-Founder
Survey details
• The GCA commissioned YouGov to
survey the groceries supply chain
• It was live from 8th to 26th May 2014
• The survey received 574 responses
• 46 from Trade Associations
• 381 from Direct Suppliers
• 147 from Indirect Suppliers
2
About those who participated
Stakeholder Type
Who took part?
Trade
association
12% 7%
Supplier categories
Direct supplier
24%
Fruit / Vegetables
18%
9%
12%
14%
Ambient
Indirect supplier
62%
Other
10%
10%
Chilled dairy / ready meals
7%
6%
Meat / fish / poultry
Trade association categories
5%
4%
Frozen foods
Alocholic drinks
3%
Household goods
2%
3%
Non-alcoholic drinks
1%
Pet food
5%
Fruit / Vegetables
56%
Meat / fish / poultry
46%
Chilled dairy / ready meals
33%
Frozen foods
26%
Ambient
3%
23%
Alocholic drinks
18%
1%
1%
Non-alcoholic drinks
18%
Cleaning products
1%
1%
Pet food
Toiletries
1%
Own label
Toiletries
4%
10%
8%
Cleaning products
5%
Household goods
5%
Branded
Q1. Please tell us which organisation of organisation you are responding on behalf of. Base: 617
Q2. What products do you supply across branded and own label types? Base: 381 direct suppliers and 147 indirect suppliers
Q2a. What categories do you represent? Base: 40 - trade associations
4
Suppliers characteristics
Head Office
Personally based …
10%
16%
84%
UK
90%
Outside the UK
In the UK
Outside the UK
Size
7%
0 to 9
47%
22%
21%
10 to 49
50 to 99
8%
15%
Direct
Indirect
16%
15%
100 to 249
250 to 1,000
Turnover
More than 1,000
2%
Not sure
2%
2%
15%
£6m-£9m
8%
10%
£10m-£19m
8%
11%
£20m-£49m
23%
5%
16%
Up to £5m
6%
£50-£99m
3%
More than £100m
3%
Q18. Number of employees (308); Q19. Turnover (308); Q19a. Is the head office based … (300); Q19b. And where are
you personally based? (300).
Not sure
59%
Direct
Indirect
16%
18%
30%
5%
6%
5
Which retailers supplied?
Tesco
63%
Sainsbury's
59%
Asda
59%
Morrisons
57%
Aldi
54%
Waitrose
53%
Co-operative
47%
Marks and Spencer
Lidl
Iceland
q3. To which of these retailers do you currently supply groceries? (multiple) Base: 357 direct suppliers only
33%
29%
26%
6
Awareness of Code and GCA
Awareness of and familiarity with the Code
Trade associations
Direct suppliers
Indirect suppliers
27%
37%
16%
9%
Very familiar
20%
49%
21%
33%
Quite familiar
15%
36%
Only aware it exists
13%
22%
Unaware
Varies significantly with supplier size – 25% of Micros unaware, 10% Large.
26% of Large suppliers ‘very familiar,’ 4% of Micros
Q3a and Q3b. Are you aware of the Groceries Supply Code of Practice (the Code)? How familiar or not are you with
all the elements of the Code? Base: Trade Associations (41); Direct Suppliers (354); Indirect Suppliers (129).
8
Awareness of and familiarity with the GCA – role and responsibilities
Trade associations
Direct suppliers
Indirect suppliers
29%
14%
10%
39%
38%
39%
Very familiar
Quite familiar
5%
17%
24%
29%
25%
Only aware it exists
25%
Unaware
Varies significantly with supplier size – similarly to awareness of the Code.
32% of Micros unaware of the GCA, 20% of Large.
5% of Micros very familiar, 26% of Large suppliers.
Q4a and Q4b. Before this survey were you aware of the Groceries Code Adjudicator (GCA) and its role and responsibilities? How familiar or not are you with
the GCA’s role and responsibilities? Base: Trade Associations (38); Direct Suppliers (347); Indirect Suppliers (126).
9
The GCA’s Critical Success Factors
63%
61%
The culture has changed to a more collaborative approach
Supplier feel able to raise issues with retailers / CCOs when
they feel treated unfairly
63%
67%
66%
Suppliers feel they have a greater influence over their terms of
supply
48%
The whole supply chain is working more efficiently
30%
19%
The cost of doing business with retailers is reduced
22%
22%
17%
Advice and guidance published
15%
21%
13%
By the number of investigations carried out
By the number of arbitrations the GCA is asked to carry out
Don’t know
59%
60%
30%
35%
38%
Retailers have been fined for breaking the Code
Other
75%
7%
7%
19%
4%
3%
4%
3%
2%
Q5a. How will you judge that the GCA has been a success? Please tick up to 4. Base: trade associations (27); Direct
suppliers (230); indirect suppliers (90).
28%
28%
52%
58%
Trade
Associations
Direct
suppliers
Indirect
suppliers
Direct suppliers especially keen on
creation of collaborative culture
Indirect and Trade Associations
rate supply chain efficiency as
more important.
Trade Associations highlighted
arbitrations as important.
10
Summary (1) – The Code and the GCA
• Overall – 84% are aware of the Code, 72% the GCA
• Awareness varies by supplier size with the smaller ones less likely to
be aware and familiar with both.
• Two-thirds of trade associations and direct suppliers are ‘very’ or
‘quite’ familiar with the Code, this contrasts with 42% of indirect
suppliers.
• 68% of trade associations are ‘very’ or ‘quite’ familiar with the GCA,
the same is true for half of direct and indirect suppliers.
• Critical success factors should be:
• Culture change to collaborative approach;
• Feeling able to raise issues with retailers;
• Greater influence for suppliers; and
• Supply chain efficiency.
11
Experience of issues and raising issues with the GCA
Issues categorised by the Code: Which issues have they experienced?
79%
Net: any issues
40%
Variation of supply agreements and terms of supply
Unjustified charges for consumer complaints
37%
Obligation to contribute to marketing costs
36%
Delay in payments
35%
33%
No compensation for forecasting errors
25%
Payment as a condition of being supplier
Not applying due care when ordering for promotions
23%
Not meeting duties to relation to de-listing
22%
19%
Variation of supply chain procedures
17%
Payment for wastage
Payment for better positioning of goods unless in relation to…
13%
Payment for shrinkage
8%
Tying of third party goods and services to payment
8%
Not escalating concerns over breaches of the Code to senior…
No issues with the Code
8%
21%
q6a. During your contract period, and since June 2013 have you experienced any issues with retailers that are
covered by the Code areas below? Please don’t include any of these that you had agreed to at the start of the contract
period. (multiple) Base: 303 direct suppliers only
Medium / Large suppliers
experience more issues of
course.
28% of Micros have no
issues.
48% of Large suppliers
have variation of supply
agreements; 44% - delay
in payments.
15% had just 1 of these
issues.
32% had 5 or more of
these issues.
13
Aspects of retailer practice that have the most significant negative
impact (1): Payments, prices, deductions, charges
Q6b. What areas of retailer business practices / behaviour have the most significant negative
impact on your business in the last 12 months? (open)
14
Aspects of retailer practice that have the most significant negative
impact (2): Payments, prices, deductions, charges
“(1) Auditing of prior years to claim payments for promotional and
other activity - anything up to 6 years; (2) unilaterally imposing
charges for customer complaints etc. (3) inaccuracies in forecasting”
“Disputing or delaying
payment of genuine
invoices for >120 days
and then looking to
trade them away in
year end negotiations
has become common
place. Doing deals that
involve upfront cash
payments for growth
commitments that do
not materialise.”
“The worst is creating new high
charges and then emailing account
manager and then taking the
money without prior agreement
from our account. I believe this is
also being used to fill gaps in their
sales performance.”
Q6b. What areas of retailer business practices / behaviour have the most significant negative
impact on your business in the last 12 months? (open)
“Late payment for
specious reasons.
Renegotiation of
contract under
threat of
"consequences"
post signing.
Requirement for
extra contribution
to margin.
Expectation for
compensation to
maintain margin as
a result of retailer
reducing the shelf
price.”
15
Examples of issues that GCA had heard about recently: Which issues
have they experienced?
80%
Net: any issues
46%
Incorrect deductions from invoices with or without notice
Incorrect requests for payments and charges going back up to 6
years
Requirement to fund retailer margin shortfall not agreed at
start
45%
36%
33%
De-listing without reasonable notice
Requirement for lump-sum payments over and above those
agreed at start
Not compensating for under-orders or penalising for nondelivery of over-orders, against agreed forecasts
32%
Requirement to pay listing fees
32%
33%
Requirement for marketing payments over and above those
agreed at start
Requirement to use a third party packaging supplier more
expensive than market price
Overbuying at promotional price and subsequently selling at full
price
Other
None of these
24%
24%
18%
Medium / Large
suppliers experience
more issues of course.
24% of Micros have not
experienced any, 10%
of Large.
31% experienced just 1
of these.
32% experienced 5 or
more of them.
6%
14%
Q6c. We have heard that the following issues have affected some suppliers. Have you experienced any of these
issues in the last 12 months? (multiple) Base: 278 direct suppliers only
16
Would you consider raising issues with the GCA?
Trade associations
61%
Direct suppliers
38%
Indirect suppliers
39%
11%
18%
44%
10%
Yes
No
29%
51%
Don't know
Smaller suppliers more likely to consider raising issues with the GCA than larger ones.
41% of Micro, 35% of Small, 41% of Medium, 31% of Large suppliers.
q4c. Would you consider raising any issues you have about groceries supply with the GCA?
Base – only those aware of the GCA: trade associations (28); direct suppliers (242); indirect
suppliers (94).
17
Why wouldn’t suppliers raise issues with the GCA?
You fear retribution
58%
Don't think the GCA will be
able to do anything
41%
You can address the
concerns yourself
19%
Don't think your concerns
are important enough
You already alerted a trade
association
10%
2%
Other reason
7%
Don't know
8%
Q5. If you have issues about grocery supply but don’t want to follow these up with the GCA is this because …
(multiple). Base: (51) all aware of the GCA but wouldn’t raise issues.
Smaller suppliers not sure
their issues are important
enough, Larger suppliers
more concerned about
retribution or think they
can handle themselves.
From another angle: 20% of
all Large suppliers aware of
GCA fear retribution if they
raised an issue.
18
Have or know where to find the details of the Code Compliance Officer (CCO)?
Marks and Spencer (n=117)
27%
Tesco (n=225)
26%
Sainsbury's (n=211)
23%
Waitrose (n=191)
23%
Aldi (n=194)
22%
Asda (n=210)
20%
Morrisons (n=205)
18%
Iceland (n=94)
15%
Co-operative (n=169)
Lidl (n=105)
14%
11%
q9. For which of the following retailers do you have (or know where to find) the contact details of the CCO? Base: as
indicated per retailer, direct suppliers only
19
Ever raised an issue?
18% of Micro, 20% Small, 19% Medium, 28% Large.
Raised an issue?
Yes
23%
About which retailer? (as a % of suppliers)
No
77%
Tesco
12%
Morrisons
12%
Sainsbury's
5%
Marks and Spencer
When raised an issue
4%
Asda
February 2010
to June 2013
July 2013 to
now
12%
17%
3%
Waitrose
2%
Co-operative
2%
Aldi
1%
Iceland
1%
Lidl
0%
q10a.Have you ever raised an issue about compliance with the Code to a buyer? (base: direct suppliers 259)
q10b_1 and q10b_2. Raised an issue between Feb 2010 and June 2013? Between July 2013 and Now. (base: all direct suppliers 259).
Q11. For which retailers have you raised an issue with compliance with the Code? (base: direct supplier having raised an issue – 60)
20
Summary (2) – Issues experienced
• Four out of five suppliers have had a Code related issue, a third have
had 5 of more of the categories of issue.
• Variation of supply agreements, unjustified charges for customer
complaints, contributing to marketing costs, delays in payment and
forecasting errors are the leading issues.
• Four out of five have experienced other related issues, the leading
ones being:
• Incorrect deductions from invoices and incorrect requests for
payments and charges.
• Half of suppliers are unsure about whether they would raise an issue
with the GCA – 61% of trade associations said they would.
• 23% of suppliers had raised an issue in the past.
21
Supply Agreements
Have a written supply agreement with these retailers?
Aldi (n=194)
44%
Tesco (n=225)
44%
Waitrose (n=191)
33%
Co-operative (n=169)
31%
Sainsbury's (n=211)
31%
Lidl (n=105)
30%
Marks and Spencer
(n=117)
30%
Asda (n=210)
28%
Iceland (n=94)
28%
Morrisons (n=205)
21% of Large
suppliers do not
have a written
supply
agreement with
any retailers.
This is the case
for 42% of
Micros.
23%
q7a. For which, if any, of these retailers do you have a written supply agreement? (multiple) Base: as indicated per
retailer, direct suppliers only
23
Change in practice over time
Change in retailer practice over time
All
Feb 2010 to June 2013
July 2013 to now
20%
17%
Improved
63%
17%
69%
Stayed the same
14%
Worsened
Trade associations
Feb 2010 to June 2013
July 2013 to now
23%
26%
Improved
25
61%
18%
65%
Stayed the same
9%
Worsened
Q15a/b. How, if at all, do you feel the following retailers practice changed between Feb 2010 and June 2013 (when the Code became statutory) / July
2013 and now? Base: all, trade associations and indirect suppliers (all), direct suppliers (as indicated per retailer). Exc. Not sure.
Change in retailer practice over time: Suppliers
Direct suppliers
Feb 2010 to June 2013
July 2013 to now
19%
15%
Improved
67%
14%
74%
Stayed the same
11%
Worsened
Indirect suppliers
Feb 2010 to June 2013
18%
July 2013 to now
17%
Improved
26
55%
27%
60%
Stayed the same
24%
Worsened
Q15a/b. How, if at all, do you feel the following retailers practice changed between Feb 2010 and June 2013 (when the Code became statutory) / July
2013 and now? Base: all, trade associations and indirect suppliers (all), direct suppliers (as indicated per retailer). Exc. Not sure.
Overall assessment
Supplier perception of compliance with the Code
Trade associations
23%
Direct suppliers
22%
Indirect suppliers
All
13%
21%
Consistently well
Q16. Overall, how well or not do you think retailers follow the Code? Exc. Not sure.
47%
30%
53%
21%
55%
28%
52%
Mostly
4%
4%
23%
Rarely
1%
Never
28
4%
Summary (3) – Experience of retailers
• Written supply agreements are reported to be in place
by less than half of those responding.
• Thinking about the time since 2010 more feel that
retailers practice has improved than worsened
• Larger suppliers feel that retailers are more compliant
with the Code than smaller
• Trade associations are more positive about compliance
than the direct suppliers they represent
• Indirect suppliers believe that retailers are less compliant
than the direct suppliers have experienced
29
Other comments
• Comments made at this stage
were diverse and often very
specific to suppliers
circumstances, but …
• A couple mentioned Boots and
Superdrug not being covered
by the Code.
• A few reported a disconnect
between retailer senior
management commitment and
reality on the front line of
buying.
• Some feel that retailers are
using the Code to their
advantage, others felt that
things were improving.
• A few mentioned that indirect
suppliers are not protected /
not as well protected.
“Independent investigations
are required without causing
companies to be identified.
The key issues of
unapproved deductions,
illegitimate audit claims and
drop and drive deductions
could be simply outlawed
and audited with significant
penalties
“The GCA is starting to
become effective and we
may see retailers start to
change their behaviour.
However, it will take
some time to truly
understand whether the
retailers have/will
changed their practices.”
Q6b. What areas of retailer business practices / behaviour have the most significant negative
impact on your business in the last 12 months? (open)
“Retailers hide
behind the GCA
when it suits
them BUT, there
has definitely
been an
improvement
versus the bad
old days!”
“Retailers pay it lip service
at a senior level but this
does not flow through to
the actions taken by their
buying teams on a daily
basis. However, within our
business it usually feels a
better long term
relationship solution to try
& work through noncompliance issues rather
than escalate.”
30