Following a one year transition period, the Food and Grocery Code of Conduct (FGCC) comes into full effect on July 1, 2016.
From July 1 the signatories to the code – currently Woolworths, Coles, Aldi and AboutLife – must be fully compliant in their dealings with all suppliers.
These signatories represent a substantial portion of retailers in the fast moving consumer goods (FMCG) sector, although a number of retailer/wholesalers – notably Metcash – are still yet to sign the code.
A spokesperson for the Australian Food and Grocery Council (AFGC), told C&I Week: “Woolworths and Coles had been instrumental in establishing this code with the AFGC, and their willingness to come to the table and develop a meaningful code was a key factor in making it possible.
“Signing onto the code marks Woolworths, Coles, Aldi and AboutLife commitment to fair dealing and to improving the operation of one of the most dynamic and competitive sectors of the economy – the fast moving consumer goods sector.”
What do suppliers need to do now?
The Australian Financial Review (AFR) reported last week that, in the lead up to the July 1 implementation, a disparity in the ways in which Coles and Woolworths have sought to introduce new Grocery Supply Agreements (GSAs) has left suppliers so confused that “hundreds” are opting not to sign at all and continue to sign under old agreements.
The AFGC told C&I Week suppliers are under no compulsion to sign new GSAs.
“It’s important to note that regardless of the differences in approach by the major retailers and regardless of whether suppliers have signed new Grocery Supply Agreements or choose to continue under old agreements, from 1 July the retailers are fully bound by all the code’s obligations in their dealings with all suppliers,” an AFGC spokesperson said.
Signatory retailers must be fully code compliant in their dealings with all suppliers regardless of whether the supplier has signed a new GSA or not.
FGCC in brief
The code applies a range of clear obligations on retailers including tough restrictions on retrospective and unilateral variations to GSAs; prohibition on payment for shrinkage; requirement to pay on time; tough restrictions on payment for wastage, shelf position and retailer promotions; greater transparency on the basis for shelf allocation for products; recognition of the importance of intellectual property rights and confidentiality in driving innovation and investment in new products; and a low cost and fast track dispute resolution mechanisms.
“Many suppliers have taken the opportunity of the code’s introduction to negotiate changes to their supply agreements and the issuing of new, negotiable code-compliant GSAs has been the vehicle for these discussions.
“Some suppliers will prefer to continue with pre-existing arrangements knowing that the code gives them greater protection in areas such as unilateral or retrospective changes to contracts; demands for payments for shrink, waste or shelf-position; and on-time payment.”
“The goal remains to encourage other supermarket retailers and wholesalers to also sign up to the code, noting that a review will be held after three years (that is, in two years time) and the terms of reference for that review include whether it should become mandatory across all major supermarket retailers and wholesalers,” the AFGC said.