According to the Groceries Code Adjudicator’s (GCA) 2022 sector survey, inflation has weakened the relationships between the UK’s designated retailers and their suppliers. The following are some of the survey’s key findings:
A quarter of suppliers (26%) said a retailer had refused to consider a request for a cost price increase (CPI) or had taken an unreasonable amount of time to complete the request. It has been the most frequently mentioned topic in GCA surveys over the last five years.
In the previous 12 months, 80 percent of suppliers had requested at least one CPI.
Following year-over-year improvements in retailer-supplier relationships through 2021, the survey now shows a drop from 56 percent in 2021 to 47 percent in 2022 in the number of suppliers not facing any Code-related issues.
According to the findings of a YouGov survey, after two years of pandemic in which retailers and suppliers collaborated closely and improved their relationships, rising prices have strained relationships, and Code-related issues between the two have also increased.
Retailer performance has been uneven in reaction to these challenging conditions. Despite sector challenges, Aldi has returned to the top of the leader board with a score of 98 percent, and five retailers have either improved or maintained their score. The other eight retailers, on the other hand, have seen drops in the way their suppliers score them (up to 11 percent).
The Groceries Code Adjudicator, Mark White, stated:
“Inflation has impacted the entire grocery industry, as evidenced by the large number of requests for price increases from suppliers.
“I’m concerned that the stress has harmed relationships and exacerbated larger issues.” My top priority is to work with all retailers to ensure that they treat their suppliers fairly as they navigate the cost-price process during this challenging period.
“It’s also critical that suppliers report any issues they have in a confidential manner so that I can address them quickly with the retailers.”
The Survey of the Grocery Industry in 2022
The GCA’s 9th Groceries Sector Survey, which was performed in 2022, received over 2,500 responses. For the first time, suppliers were questioned if they had been impacted by a retailer’s refusal to accept a CPI request or an excessive delay in agreeing to or implementing a CPI.
The poll gives thorough information on the difficulties confronting the entire sector, as well as supplier understanding of the Code and the GCA and their input on retailer performance.
Observance of the law
In comparison to the previous year, the poll reveals lower Code compliance. Only 47% of vendors have had no Code-related difficulties this year, compared to 56% in 2021.
Despite the decrease in the percentage of suppliers without any Code-related complaints, 8% of suppliers raised an issue with a retailer in the previous 12 months, which is consistent with the 2019-2021 findings.
CPIs and inflation
The grocery industry, like the rest of the economy, is experiencing a perfect storm of supply chain disruptions, rising energy, raw material/ingredient, and packaging costs. Suppliers of many types of grocery products are being impacted by this considerable rise. Eighty percent of people polled at the start of 2022 said they wanted a CPI.
However, one in every four suppliers (26 percent) has been impacted by a retailer’s unwillingness to accept a price increase request or an unjustified delay in processing the request. In the last five years, no other concern, whether Code-related or not, has been highlighted by a larger percentage of suppliers.
De-listing
De-listing frequently occurs after a failed CPI negotiation, which could explain why 16 percent of suppliers complained about de-listing without adequate warning (compared with 12 percent in 2021). There was also a 3% increase in retailers failing to meet their de-listing obligations (from 6 percent to 9 percent ).
Other concerns
Suppliers also identified a variety of other concerns, including:
Payment delays: When there are issues regarding deliveries, 12 percent of suppliers report delays in or failure to receive payment (up from 8 percent in 2021).
Invoice problems: 18 percent of suppliers said the protocols and procedures in place to quickly resolve invoice disputes were insufficient (up from 14 percent in 2021).
Forecasts errors: 18 percent of suppliers indicated they had incurred significant expenditures as a result of retailers’ erroneous forecasting (up from 16 percent in 2021).
Steps to take next
YouGov is conducting a series of deep dive interviews with suppliers on behalf of the GCA following the release of the results. The findings will provide a deeper knowledge of the difficulties that suppliers are dealing with.
The findings will be presented during the GCA’s annual conference, which will take place in late September. The annual conference’s details will be posted on the GCA website soon.