What’s Working (And What’s Not) In UK Grocery B2B Payments Cleanup

The U.K.’s food supply chain has a B2B payments problem. Top grocers have been accused of deliberately delaying payments to suppliers, with top player Tesco recently raising eyebrows after policymakers released a scathing report that found the grocery chain to have “knowingly delayed paying money to suppliers in order to improve its own financial position.”

Those words were written by the nation’s Groceries Code Adjudicator, an industry body created in 2013 to monitor grocery company treatment of food suppliers.

In its latest report, the GCA expanded its scope across 10 major supermarket chains in the nation, and pointed to three in particular that are treating their suppliers poorly: Morrisons, Asda and Iceland.

Reports this week said the Adjudicator’s research into the industry revealed that one-fifth of Morrisons’ suppliers reported that the supermarket giant either rarely or never adhered to the Code. The data coincides with a survey carried out by YouGov for the GCA, which found that 62 percent of grocery suppliers had experienced some type of issue related to breach of the Groceries Code.

For suppliers, payment issues remain the top burden when dealing with grocers. Incorrect deductions from invoice – with or without notice – were cited by 30 percent of suppliers, making these errors the most common issue for grocery suppliers.

The suppliers that experienced an issue with grocers breaching the Code cited late payments as their most pressing concern, the report said.

Making Progress

According to GCA Adjudicator Christine Tacon, while these statistics are not stellar, they do represent an improvement both in the GCA’s effectiveness in protecting suppliers against unfair treatment from supermarket firms, as well as in payments practices between grocery buyers and suppliers.

Tesco made a surprising recovery in its reputation with regulators, as the company was cited by suppliers as having the highest performance improvement. Nearly two-thirds of suppliers surveyed said Tesco’s business practices had improved.

“All the regulated retailers have acted on the issues I have raised over the past year and there have been some excellent examples of changes in retailer practice,” said Tacon when the survey results were revealed at the GCA’s third annual conference.

“I am delighted that direct suppliers are seeing the impact of real change for their businesses,” she continued. “For the second year the running number of suppliers reporting Code-related issues has fallen.”

Still Work Ahead

While awareness of the GCA is up – as is the number of suppliers reporting no issues involving a breach of the Code — the report highlighted the struggle food suppliers face when they feel they are being mistreated by a grocery chain.

According to the Adjudicator, one-fifth of suppliers surveyed said they would not raise an issue with the agency, most commonly because they fear retribution.

Tacon reflected on her frustrations over this finding.

“I am disappointed that the number of suppliers saying they would bring an issue to me remains stubbornly on 47 percent – with more than half giving the reasons as fear of their relations with a retailer being damaged,” she said. “This is despite the publicity around the Tesco investigation and a clear demonstration that I can carry out a complex investigation with significant findings and benefit for suppliers with no identities revealed.”

Suppliers are also insufficiently aware of and educated on the Code, analysis found. Nearly two-thirds of suppliers surveyed said their firms do not offer training on the Code, with smaller suppliers less likely than larger ones to receive this type of training.

Clearly, there is still work ahead for the GCA. The agency recently received approval that empowers the body to fine companies up to 1 percent of its U.K. turnover should breaches of the GCA Code of Practice be found at these grocers. Tacon said she welcomes this development, and said she would focus on “redoubling” efforts to help suppliers overcome their reservations in reporting issues to the GCA, and to increasing awareness of the Adjudicator’s purpose.

As a result of the latest findings, the GCA announced a new list of Top 5 issues, including payment delays, pay-to-stay arrangements and payments for better positioning.