Could EPR spark a new crisis for buyer-supplier relations?

Supermarket buyers have pressed a “reset” button as they seek to restore margins after years of coping with the pandemic and the cost of living crisis, a major new report by the Groceries Code Adjudicator last week found.

Unfortunately for suppliers, the evidence submitted to Mark White to lead him to that conclusion suggests they are facing reduced co-operation from retailers amid a barrage of old-school negotiation tactics.

And with suppliers already reporting being stonewalled if they so much as mention cost price increases, a new shadow has appeared on the horizon in the form of Defra’s planned packaging tax, which threatens to set retailers and suppliers at loggerheads on a new front.

With supermarket bosses already promising “robust” negotiations over the government’s new extended producer responsibility (EPR) charges, could increasingly fractious relations between retailers and suppliers be about to descend into crisis?

At a conference in London last week, White presented the results of a deep dive by YouGov experts into the findings of his July suppliers’ survey and subsequent in-depth interviews with nearly 30 direct suppliers to the supermarkets he polices.

The report found that while the tsunami of CPI requests that characterised the cost of living crisis had calmed, a raft of categories were still seeing input inflation. And it claimed supermarkets’ willingness to even discuss price increases was “wearing thin”, leading to “avoidance tactics or flat-out refusals to engage” by buyers.

The report claims supermarkets have shown less “compassion and understanding” in the past year. While experts suggest these are not exactly qualities supermarket buyers are famous for, the report also raises concern over a series of “veiled threats” by supermarkets to delist suppliers if they rock the boat on price.

It found more than 14% of suppliers claimed to have had products delisted without reasonable notice in the past year. Although that’s a one percentage point improvement versus the previous 12 months, White sees it as still “far too high”.

“With grocery retail prices more expensive than before, I have seen the retailers focus on refining their offer to consumers,” says White. “One knock-on effect is retailers delisting products.

“Several suppliers have also told me about retailers using the threat of delisting as a tactic during negotiations.”

Rather than engage, supermarkets have been expecting suppliers to swallow cost inflation and pay for it through measures such as efficiency initiatives, the report finds.

Bad omen

Against the background of this behaviour over the past 12 months – the focus of White’s report – the arrival of Defra’s EPR fees from October 2025 is already worrying suppliers.

At last week’s event, Sainsbury’s code compliance officer Nick Grant promised “robust” conversations with suppliers trying to pass the costs of EPR on to supermarkets, despite Defra’s insistence that it expects 80% of the cost to be passed on to consumers.

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John Noble, director of the British Brands Group, believes the omens for suppliers when it comes to the impact of EPR on price negotiations are not good.

“The illustrative fees identified so far by Defra show it will significantly increase the costs of packaged product suppliers,” he says (see table). “This is a government initiative with the financial burden falling on those who place the packaging on the market – the producers of packaged branded goods and retailers’ private-label products. This, in principle, is not a controversial or resisted development.

“But recent experiences have highlighted how challenging it can be for suppliers to pass cost price increases through the supply chain, leading the GCA to introduce ‘Seven Golden Rules’ in 2022.”

The rules include maintaining clear communication about how long the CPI process will take and only asking for specific information needed to make a decision.

Despite them, “the pass-through of cost price increases relating to EPR fees can be expected to be just as painful for suppliers, particularly as early cost price calculations may have to be based on illustrative rather than actual [final] EPR fees”, says Noble.

“We could see retailers take different approaches and negotiate positions between branded and private-label suppliers. There is the potential for them to favour their own private-label products with a fairer approach and not treat similar cases alike, potentially discriminating against brands and distorting competition between the two business models.”

Ged Futter, founder of The Retail Mind, also predicts “huge clashes” between retailers and suppliers.

“It’s a given, I’m afraid,” he says. “At the moment there are huge clashes between companies and the government over the estimated fees and the costs, but ultimately this will lead to those clashes being between the retailers and suppliers.

“The retailers will say they will not pay for it,” Futter adds.

White’s approach, anchored by his Seven Golden Rules, is seen to have been fairly effective in preventing full-scale conflict between supermarkets and suppliers, but some fear the limitations of the Groceries Supply Code of Practice will be brutally exposed once EPR costs are added to the mix.

That’s because, while White’s rules carry weight by virtue of being based on principles of the code, they remain guidance.

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High inflation in recent years means that “understandably the focus has been CPIs, and we have seen the GCA publish its golden rules for dealing with them”, says Mark Jones, a partner at Gordons LLP. “But the problem with CPIs – and cost price decreases – is that the GCA does not have the power to intervene on the issue of price.

“Retailers don’t have to renegotiate prices due to commodity price increases. The code restricts what a retailer can do after the supplier agrees terms.”

Meanwhile, though the Adjudicator says there are “signs of improvement” in the overall adherence to the code, there remains a deafening silence from large quarters of the supply chain.

White’s report reveals 41% say they would either not or are unsure if they would raise an issue with the GCA even if they encountered it, an alarming statistic that has barely changed since the pandemic. Of those, 42% blamed fear of the consequences for their business of supermarkets finding out.

This may have been a year of reset, but some things, it seems, remain very much the same.