Cracking the Code

It's a complete waste of time. We will do the minimum for compliance, reluctantly, because we have to." Iceland supermarket chief executive Malcolm Walker is to be admired for his honesty, if not exactly his tact, in appraising the new supermarket Code of Practice, which came into force last week.

Yet if you are a supplier, the new code does not sound like such a waste of time: among changes proposed are the ending of the practice whereby suppliers have to support in-store retailer promotions. Nor will it be possible for terms between suppliers and retailers to be altered retrospectively. Supermarkets will have to keep written records of their dealings with suppliers and they will not be able to charge suppliers for stolen items.

Consumer minister Kevin Brennan insists it has value: "The new code will be a great improvement on the current system. The power that large grocery retailers are able to wield over their suppliers can create pressures on small producers, especially in these difficult economic times."

We have all heard whispers of certain dealings between supermarkets and suppliers that push the limits of fair dealing. According to one major figure in the meat industry: "The worst excesses were in horticulture, but they do go on in meat; it's just that people are very reluctant to speak about them."

level of impact

Yet will this new Code of Practice really have much of an effect? There is now a promise of anonymity enshrined in it for those suppliers that want to come forward with a complaint against a supermarket. Yet old habits die hard. And, when complaints are anonymous, people realise that problems will still come hard on the heels of anyone who makes a fuss. "People can deduce who has spoken out they can work it out by a process of elimination and using their contacts," says our industry insider.

In such a climate of fear, it is hard to assess whether the new Code of Practice will have any effect on the meat industry. "It's too early to say what the impact will be," says Jon Bullock of Bpex. "The initiatives are to be welcomed if they promote transparency and fair distribution in the supply chain."

However Terry Jones, of The National Farmers' Union believes change is very much in the offing: "I haven't spent the last 10 years pushing for legislation that doesn't have any teeth. You could drive a coach and horses through the previous legislation [the 2002 code of Practice], but this should stop much of the perverse activity.

"I'm speaking from a sector where there will be less obvious changes," he adds. "Things will alter for processors and abattoirs much more than for farmers. But even from this perspective, I can see how the processors and abattoirs have to deal with the supermarkets on a day-to-day basis, and they'll have a much easier business relationship. So many agreements were done on the basis of one email, which never provided a solid basis for long-term business. Contracts changed suddenly and new, unreasonable demands were placed on suppliers."

But, Jones adds: "If the processors and abattoirs aren't being squeezed as much, then, in turn, that will affect the way they treat the farmers who supply them. Ultimately, it will have an effect on the whole supply chain."

So whether it is a new weighing or labelling machine, better supply processing lines in abattoirs or shiny metal fencing for farmers, the greater slack in the supply chain will result in more investment and better facilities, apparently. It is a positive image of a bright, new future in which all will benefit.

Or is this quite how things will pan out? Unless an ombudsman is tacked on to the legislation, says Jones, then malpractice may continue. "You wouldn't play a game of rugby without a referee. He's as much a part of the game as the players and the ball," he insists. The government has embarked on a 12-week consultation programme and, so far, the signs are that they will appoint someone to police the new code.

no real change?

Yet Norman Bagley of the Association of Independent Meat Suppliers has his own reasons as to why the Code of Practice will not work. "The farming community sees this code as a step forward," he says, "but do you really think the processors will raise the price they pay to farmers to take into account their better terms with large retailers? It's not going to help the livestock prices defy gravity processors will pay what the market conditions demand."

However, before the middle links in the meat supply chain start celebrating extra money from the supermarkets, with the same prices due payable to farmers, Bagley urges it will not be quite so good for them either. "Supermarkets are more street-wise than the regulatory authorities. It's laughable to say they won't squeeze the last bit of money out of the supply chain. They'll just call it something else rather than 'promotional funding'," he says. "In the current competitive environment, nothing will change."

This is plausible, as it takes into account the huge buying power of the supermarkets. Except, that is, for some activity that largely went unreported in the days leading up to implementation of the new code. Prior to 4 February, Jones says he saw "some of the worst business activity in my eight years at the NFU". "There was a series of very aggressive, one-off unilateral, non-negotiable price cuts that had to be carried out by suppliers immediately for trading to be continued for the next 12 month," he says.

Surely the supermarkets would not have acted in this way if nothing were about to change? l

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