Supermarket buyers are stonewalling suppliers over requests for cost price increases, according to a report commissioned by Groceries Code Adjudicator Mark White.
The YouGov report, released at this week’s GCA conference in London, claims retailers viewed the 2023/2024 financial year as a chance to “reset” their businesses after years of disruption from the pandemic and the cost of living crisis.
But evidence submitted from companies who took part in his “deep dive” from the GCA’s annual survey said it had left those suppliers still facing continued high commodity prices – such as for cocoa, glass and bread – facing a brick wall when it came to trying to get CPI requests approved.
While White said overall the findings of his report showed “signs of improvement” in the relationship between suppliers and retailers, he claimed the dynamic had become “more complex”. A raft of categories still faced cost price pressures, but suppliers were facing point blank rejections from supermarkets to discuss the issues, he added.
His report found more than 14% of suppliers claimed to have had products delisted without reasonable notice in the past year, partly as a knock-on impact.
While that was a 1% improvement from the previous 12 months it was, White said, still “far too high”.
“Cost recovery is still at an existential point for some suppliers who are reliant on expensive commodities (cocoa, glass, bread etc),” says the report, commissioned by White from Gavin Ellison, research director at YouGov.
He added: “Retailers that had previously granted CPIs are now using avoidance tactics or flat-out refusing to engage.
“A minority of suppliers are still trying to push historic CPIs through from 2022/23 that were rejected at the time by buyers.
“Retailers are continuing to ask for extensive evidence for cost justification, including ‘efficiency initiatives’.”
The report claims supermarkets have shown less “compassion and understanding” with the plight of suppliers facing rampant inflation in their sectors than in previous years. While most delists had been done “by the book”, the use of “thinly veiled threats” of delists had become common as supermarkets used the tactic to keep prices down, it said.
“Overall inflation rates [falling] mask varying costs of different inputs, with some still rising and others falling,” White told the conference.
“The result of all of this is that some suppliers are still asking for cost price increases whereas, for certain products, the retailers may be asking suppliers for cost price decreases.
“While the reduction in CPI requests being made by suppliers is welcome, there is now greater complexity.”
“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.”
Amazon is one of the retailers in the spotlight, having been accused of delisting suppliers with as little as 24 hours’ notice.
White has threatened to launch an official investigation into the online giant after it came bottom of the table in this year’s survey, with less than half of suppliers saying they thought it adhered to the code. He told the conference no decision had yet been made on the posible legal action.
“I am very concerned about Amazon’s results, and I have made it clear that it must take swift and comprehensive action to demonstrably comply with the code,” he said.
“I am in close contact with Amazon about the actions it is taking. If I believe that it is not complying with the Groceries Code and an investigation is the most effective way to bring about change, I will not hesitate to launch one.
“I continue to gather evidence from suppliers and others about Amazon’s behaviour.”
Amazon told The Grocer last week it had taken a series of new measures it hoped would stave off the action.
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