An independent review of how the big supermarkets treat their suppliers has found that many are too afraid to complain.

Key points:

  • Suppliers say they fear retribution if they make a complaint to the supermarkets
  • ALDI was praised for simplicity, consistency and responsibility when dealing with suppliers
  • Metcash has been referred to the ACCC

The federal government’s Food and Grocery Code of Conduct was set up to manage the relationship between the supermarkets and their suppliers.

Chris Leptos, file image

Chris Leptos has warned the supermarkets about the need to improve.(Supplied: Chris Leptos)

In 2020, Chris Leptos was appointed as the Independent Reviewer under the Food and Grocery Code, conducting the review, and he surveyed a large number of the suppliers.

Suppliers have long complained about how they are treated, but Mr Leptos thinks comparing the performance of the supermarkets and publishing the results will drive change, and it is something that has not been done before. 

“It’s a world-first,” he said.

“It’s a voluntary code of conduct, so you have to pull the levers in a way that changes behaviour at the top and at the coal face among the product buyers”.

Survey results

The results of this first report are not flattering for Coles and Woolworths, despite their claims that they deal with suppliers in good faith and treat them with respect.

Eighty-one per cent of the suppliers said they were always or mostly treated fairly, but 16 per cent said their wholesaler or retailer acted unreasonably at times.

Two per cent said their retailer was unreasonable and put them under duress.

Graph

Aldi has a much better rating from suppliers than Metcash, Coles and Woolworths.(Supplied: Independent Reviewer Chris Leptos)

Suppliers have accused the supermarkets of cancelling contracts, moving products to the bottom shelf and making payments late if suppliers ask for a price rise or make a complaint. 


Suppliers were particularly concerned about their products being moved next to the equivalent “Home Brand” product, a kiss of death for product sales.

Graph

Suppliers fear “retribution” if they make a complaint to the supermarkets. (Supplied: Chris Leptos)

Suppliers not getting a fair price

The NSW Farmers Association commended Coles and Woolworths for complying with the Code’s voluntary reporting requirements, but the chair of their dairy committee, Colin Thompson, said something was clearly wrong if people were afraid of making a complaint. 

“Many farmers won’t raise concerns or ask for improved pay arrangements because of how powerful these supermarkets are.” 

He is concerned because the majority of pay rise negotiations are unsuccessful.

a pie chart in colour

Woolworths has the highest share of the food and grocery market.(Supplied: Chris Leptos)

Not all bad news

The survey shows that reports of unacceptable buyer behaviour are declining.

ALDI is the one supermarket that received a lot of praise from suppliers, according to Chris Leptos.

“Aldi’s business culture and core principles of simplicity, consistency and responsibility appear to have flowed through to its day-to-day dealings with suppliers.”

In a statement, Woolworths said it was reviewing the findings and encouraged suppliers to contact them with any concerns.

The company surveys its suppliers twice a month, and the feedback is improving.

It points to surveys by the Advantage Group, which show Woolworths ranked second among grocery and non-grocery retailers, up from 11th in 2016.

Mr Leptos will meet with suppliers around the country over the next year to see if things are changing and explain how they can use the Code to improve their relationship with the supermarkets. 

Metcash referred to the ACCC

Mr Leptos has fired a warning shot over the bow of the supermarkets, calling out their behaviour publicly and giving them a year’s notice to fix the problems.

He has referred Metcash to the Australian Competition and Consumer Commission for failing to supply information on price increases. 

Metcash is a wholesaler that supplies the IGA supermarkets and is a late signatory to the Code.

Suppliers reported the company was making late payments and deductions off invoices without their consent, which can significantly affect small businesses’ cash flow.

Mr Leptos has put all the supermarkets on notice with this report and warned them about the importance of addressing the issues raised in the survey.

“Next year, they’ll have to fix it.”

Why suppliers fear the major supermarkets
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