The Groceries Code Adjudicator has issued a warning to supermarkets about ‘pay to stay’ practices.
- Supermarkets may face scrutiny over suppliers’ fees introduced by certain chains.
- Tesco’s recent supplier fulfilment fees are under particular observation.
- Suppliers express concern over being asked for investments limited to case costs.
- Upcoming strikes at Tesco add to the tension in the retail sector.
The Groceries Code Adjudicator, Mark White, has made a decisive move to urge supermarkets to refrain from demand practices termed as ‘pay to stay’. White’s intervention comes amid concerns over certain supermarket chains requiring suppliers to financially contribute to remain stocked on shelves, a practice deemed potentially unlawful under current regulations.
A significant focus has been placed on Tesco following its introduction of new supplier fulfilment fees in March. These fees, meant to cover costs associated with the use of Tesco’s online and Booker wholesale services, have sparked industry-wide scrutiny. Initially, Tesco warned suppliers about potential delisting if they opted out, although the company has since reiterated that participation remains voluntary.
White emphasised the importance of ethical treatment of suppliers and adherence to legal guidelines by all 14 major retailers. He stated that retailers must not pressurise suppliers into taking specific actions, such as additional payments for continued partnerships. Retailers have been instructed to provide concrete evidence of compliance with the Groceries Supply Code of Practice (GSCOP) when requested.
Ged Futter, founder of The Retail Mind, highlighted further complications, noting that some suppliers feel constrained by Tesco’s insistence on directing all investments towards case costs. Many suppliers prefer a more diversified investment strategy, including promotional expenditures, rather than being limited to a single financial commitment. Futter suggested that this could lead to difficult negotiations between Tesco and its suppliers.
Adding to the stress in the retail sector, Tesco is currently dealing with industrial action as strikes looms at one of its depots. This strike involves cleaning and catering staff who have been subjected to new contract terms without any accompanying increase in pay.
The Groceries Code Adjudicator’s warning to supermarkets highlights the growing tensions between retail chains and their suppliers.
