The establishment of the Food and Grocery Code Conduct (the code) has been one of the most significant achievements in delivering a meaningful and enforceable regulation that will drive behavioural change and encourage fair and effective competition across the supply chain.
The Australian Food and Grocery Council (AFGC) has been instrumental in taking the code from concept to legal reality, consulting with major retailer customers, industry regulators, and the government.
Since its establishment in 2015 and review in 2020, the AFGC – in conjunction with its nominated training provider, NextGen – has provided comprehensive training to more than 5000 people, ensuring suppliers understand retailer obligations, legal requirements and how to benefit from both. We continue to support the industry in maximising the benefits from this significant achievement through the provision of member services, training, and advice.
Anecdotal evidence, along with annual survey results, suggests that the code has established a clear set of principles relating to key aspects of trading relationships between retailers and suppliers, and is providing greater certainty and clarity on industry dealings without additional complexity or cost.
The code has been especially effective in applying:
- Tough restrictions on unilateral variations to grocery supply agreements.
- Rigour to payment times, eliminating ‘shrink’ payments, ceasing automatic deductions off remittance (unless agreed).
- Guiderails to price negotiations, range reviews and delisting processes.
- Recognition of the importance of intellectual property rights and confidentiality in driving innovation and investment in new products.
- A low-cost and fast-track dispute resolution mechanism.
The code regulates the conduct of those supermarket retailers and wholesalers who have agreed to be bound by it in their dealings with suppliers. Signatories include Aldi, Coles, Metcash and Woolworths.
With significant cost price pressure on the market, it’s worth reminding the reader of the 2020 Code Review findings and the subsequent incorporated obligations. The 2020 review noted that retailers and wholesalers play a significant role in controlling suppliers’ wholesale prices, including through the price increase processes that involve the provision of suppliers’ commercially sensitive information. The review stated that “the current verification process being used… is [not] leading to the best outcomes for suppliers or consumers”.
The review recommended new provisions for price increases to better allocate the distribution of risk between the parties. These include:
- A supplier must notify the retailer or wholesaler of a proposed price increase in writing.
- Within 30 days of being notified of the price increase, the retailer or wholesaler must, in writing, inform the supplier that they accept the price increase.
- Accept an increase in price but not the amount notified by the supplier.
- Do not accept an increase in price.
- Where the retailer or wholesaler has not accepted the price increase or accepts the price increase but not the amount notified, the supplier may request the retailer or wholesaler enter negotiations.
- A retailer or wholesaler that enters negotiations must engage in the negotiations in good faith and take all reasonable steps to conclude its position without delay.
- The retailer or wholesaler must not require the supplier to disclose commercially sensitive information in relation to the price increase or the negotiations about an increase in the price of the groceries.
- The supplier has the right to determine the price of groceries that the supplier supplies.
To ensure your teams are best equipped, the AFGC and NextGen have developed a training program to assist suppliers’ understanding of Code obligations, legal requirements and how to effectively use the code in price negotiations.
