A survey of the groceries supply chain

A survey of the groceries supply chainStephan Shakespeare

Chief Executive Officer and Co-Founder

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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

About those who participated

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Who took part?

Fruit / Vegetables

Ambient

Chilled dairy / ready meals

Meat / fish / poultry

Frozen foods

Alocholic drinks

Household goods

Non-alcoholic drinks

Pet food

Cleaning products

Toiletries

18%

12%

10%

7%

5%

3%

2%

1%

1%

1%

1%

9%

14%

10%

6%

4%

5%

3%

3%

1%

1%

4%

Supplier categories

Branded Own label

7%

62%

24%

12%

Stakeholder Type

Trade association

Direct supplier

Indirect supplier

Other

Fruit / VegetablesMeat / fish / poultry

Chilled dairy / ready mealsFrozen foods

AmbientAlocholic drinks

Non-alcoholic drinksToiletriesPet food

Cleaning productsHousehold goods

56%46%

33%26%

23%18%18%

10%8%

5%5%

Trade association categories

Q1. Please tell us which organisation of organisation you are responding on behalf of. Base: 617Q2. What products do you supply across branded and own label types? Base: 381 direct suppliers and 147 indirect suppliersQ2a. What categories do you represent? Base: 40 - trade associations

Suppliers characteristics

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84%

16%Head Office

UK Outside the UK

90%

10%Personally based …

In the UK Outside the UK

Not sure

More than 1,000

250 to 1,000

100 to 249

50 to 99

10 to 49

0 to 9

2%

2%

5%

15%

8%

21%

47%

2%

15%

23%

16%

15%

22%

7%

Size

DirectIndirect

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

More than £100m

£50-£99m

£20m-£49m

£10m-£19m

£6m-£9m

Up to £5m

6%

3%

3%

6%

11%

10%

59%

5%

30%

18%

16%

8%

8%

16%

Turnover

DirectIndirect

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Which retailers supplied?

Tesco

Sainsbury's

Asda

Morrisons

Aldi

Waitrose

Co-operative

Marks and Spencer

Lidl

Iceland

63%

59%

59%

57%

54%

53%

47%

33%

29%

26%

q3. To which of these retailers do you currently supply groceries? (multiple) Base: 357 direct suppliers only

Awareness of Code and GCA

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Awareness of and familiarity with the Code

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).

Trade associations

Direct suppliers

Indirect suppliers

27%

16%

9%

37%

49%

33%

20%

21%

36%

15%

13%

22%

Very familiar Quite familiar Only aware it exists Unaware

Varies significantly with supplier size – 25% of Micros unaware, 10% Large.26% of Large suppliers ‘very familiar,’ 4% of Micros

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Awareness of and familiarity with the GCA – role and responsibilities

Trade associations

Direct suppliers

Indirect suppliers

29%

14%

10%

39%

38%

39%

5%

17%

25%

24%

29%

25%

Very familiar Quite familiar Only aware it exists Unaware

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).

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.

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The GCA’s Critical Success Factors

The culture has changed to a more collaborative approach

Supplier feel able to raise issues with retailers / CCOs when they feel treated unfairly

Suppliers feel they have a greater influence over their terms of supply

Retailers have been fined for breaking the Code

The whole supply chain is working more efficiently

The cost of doing business with retailers is reduced

Advice and guidance published

By the number of investigations carried out

By the number of arbitrations the GCA is asked to carry out

Other

Don’t know

63%

63%

48%

30%

52%

19%

22%

15%

19%

4%

75%

67%

59%

35%

30%

28%

22%

21%

7%

3%

3%

61%

66%

60%

38%

58%

28%

17%

13%

7%

4%

2%

Indirect sup-pliers

Direct suppliers

Trade Associ-ations

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).

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.

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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.

Experience of issues and raising issues with the GCA

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Issues categorised by the Code: Which issues have they experienced?

Net: any issues

Variation of supply agreements and terms of supply

Unjustified charges for consumer complaints

Obligation to contribute to marketing costs

Delay in payments

No compensation for forecasting errors

Payment as a condition of being supplier

Not applying due care when ordering for promotions

Not meeting duties to relation to de-listing

Variation of supply chain procedures

Payment for wastage

Payment for better positioning of goods unless in relation to promotions

Payment for shrinkage

Tying of third party goods and services to payment

Not escalating concerns over breaches of the Code to senior buyer

No issues with the Code

79%

40%

37%

36%

35%

33%

25%

23%

22%

19%

17%

13%8%

8%

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.

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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)

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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.”

“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.”

“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.”


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Examples of issues that GCA had heard about recently: Which issues have they experienced?

Net: any issues

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

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 non-delivery of over-orders, against agreed forecasts

Requirement to pay listing fees

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

80%

46%

45%

36%

33%

33%

32%

32%

24%

24%

18%

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

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.

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Would you consider raising issues with the GCA?

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).

Trade associations

Direct suppliers

Indirect suppliers

61%

38%

39%

11%

18%

10%

29%

44%

51%

Yes No 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.

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Why wouldn’t suppliers raise issues with the GCA?

You fear retribution

Don't think the GCA will be able to do anything

You can address the concerns yourself

Don't think your concerns are important enough

You already alerted a trade association

Other reason

Don't know

58%

41%

19%

10%

2%

7%

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.

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Have or know where to find the details of the Code Compliance Officer (CCO)?

Marks and Spencer (n=117)

Tesco (n=225)

Sainsbury's (n=211)

Waitrose (n=191)

Aldi (n=194)

Asda (n=210)

Morrisons (n=205)

Iceland (n=94)

Co-operative (n=169)

Lidl (n=105)

27%

26%

23%

23%

22%

20%

18%

15%

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

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Ever raised an issue?

23%

77%

Raised an issue?

Yes

No

February 2010 to June 2013

July 2013 to now

12%

17%

When raised an issue

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)

18% of Micro, 20% Small, 19% Medium, 28% Large.

Tesco

Morrisons

Sainsbury's

Marks and Spencer

Asda

Waitrose

Co-operative

Aldi

Iceland

Lidl

12%

12%

5%

4%

3%

2%

2%

1%

1%

0%

About which retailer? (as a % of suppliers)

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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.

Supply Agreements

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Have a written supply agreement with these retailers?

Aldi (n=194)

Tesco (n=225)

Waitrose (n=191)

Co-operative (n=169)

Sainsbury's (n=211)

Lidl (n=105)

Marks and Spencer (n=117)

Asda (n=210)

Iceland (n=94)

Morrisons (n=205)

44%

44%

33%

31%

31%

30%

30%

28%

28%

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

21% of Large suppliers do not have a written

supply agreement with

any retailers.

This is the case for 42% of

Micros.

Change in practice over time

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Change in retailer practice over time

Feb 2010 to June 2013

July 2013 to now

20%

17%

63%

69%

17%

14%

Improved Stayed the same Worsened

All


July 2013 to now

23%

26%

61%

65%

18%

9%Improved Stayed the same Worsened

Trade associations

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.

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Change in retailer practice over time: Suppliers


July 2013 to now

19%

15%

67%

74%

14%

11%

Improved Stayed the same Worsened

Direct suppliers


July 2013 to now

18%

17%

55%

60%

27%

24%Improved Stayed the same Worsened

Indirect suppliers

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

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Supplier perception of compliance with the Code

Trade associations

Direct suppliers

Indirect suppliers

All

23%

22%

13%

21%

47%

53%

55%

52%

30%

21%

28%

23%

1%

4%

4%

4%

Consistently well Mostly Rarely Never

Q16. Overall, how well or not do you think retailers follow the Code? Exc. Not sure.

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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

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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.

“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 non-compliance issues rather

than escalate.”

“Retailers hide behind the GCA

when it suits them BUT, there

has definitely been an

improvement versus the bad

old days!”

“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.”

“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

A survey of the groceries supply chain

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