Code of Conduct offers hope

This week saw the start of a new food and grocery code of conduct to operate throughout Australia. It is aimed at protecting suppliers as well as consumers of food and groceries. The major supermarkets, which are the big problem as far as farmers are concerned, have yet to agree to voluntarily adopt the standards.

The code is timely, given Woolworths poor half-year sales performance that saw their share price slump and their subsequent pledge to reduce prices to consumers in a bid to attract them back and away from Coles and the rest.

When supermarkets start talking in dramatic terms about reducing prices that does not usually mean they are going to take a profit cut, even though both Coles and Woolworths have signalled that for the next six months.

No, what it usually means is they are going to apply the screws to their suppliers, that is, cutting prices to farmers or, perish the thought, increasing their supply of cheap imports at the expense of the local product. We have seen most recently what that can lead to in terms of quality control.

The Tasmanian Farmers and Graziers Association and its peak body, the National Farmers’ Federation, will keep a close eye on the success of the Food and Grocery Code of Conduct to see whether the major chains sign up to it and, if they do, then maintain their faith with it.

Among other things, the code:

sets out minimum obligations for retailers and wholesalers relating to the making of grocery supply agreements
requires retailers and wholesalers to act lawfully and in good faith
prohibits retailers from threatening suppliers with business disruption or termination without reasonable grounds
establishes minimum standards of conduct by a retailer when dealing with suppliers, such as payment, de-listing, standards and specifications for fresh produce, and the allocation of shelf space.
Food and groceries are an $88 billion market in Australia.

The president of the Australian Retailers Association, Russell Zimmerman, has warned both major supermarket chains to be careful about their advertising claims and treatment of suppliers in their quest for higher sales.

The danger for farmers is that, through their market power, the supermarkets can do what they want and farmers are at the bottom of the supply chain, in the weakest position of all. They cannot set prices.

It is likely that the code, to be successful, has to be mandatory, binding on the supermarkets.

That is also the view of Australian Dairy Farmers, which will be watching progress closely. They said it was not perfect “but it does address several key imbalances with regard to major retailer power over suppliers and they expected all the major supermarkets to sign it.

View the code here:

http://www.accc.gov.au/business/industry-codes/food-and-grocery-code-of-conduct?utm_source=TFGA%20Email%20Distribution%20List&utm_campaign=77acf3ef09-Code_of_Conduct_offers_hope_060315&utm_medium=email&utm_term=0_4bf8088904-77acf3ef09-132070109
TFGA president Wayne Johnston