The Groceries Code Adjudicator from Mars Gets Stuck Into Tesco

Last week, the groceries code adjudicator (GCA) announced her first investigation, which will look at Tesco and the way it has behaved towards its suppliers. It is another kick in the teeth for Tesco, who are already being investigated by the Serious Fraud Office and the Financial Reporting Council over accounting issues and the overstatement of profit by £263m.

Christine Tacon, the adjudicator said, “I have reasonable suspicion that Tesco breached the code in two areas. One is reasonable payments and second is payments for better positions on shelf outside promotions.”

The GCA role was created back in January 2013, but the government has only recently pulled its finger out and passed legislation to allow the Adjudicator to actually fine transgressors, up to 1% of their annual turnover. But unfortunately, in the case of Tesco, the firm will not be fined even if they are found to  have breached the code, because the alleged ‘offences’ took place before this remedy was legally available.

However, as Tacon explained, she has some powers. The GCA can “issue legally binding recommendations on their processes and how they should behave in future. I can require them to name and shame - take out adverts in terms of what they have done”.

I worked with Tacon many years ago at Mars, when she was a young marketing manager and I was running packaging buying, and I actually met her again at the Mars alumni dinner just over a year ago. I enjoyed working with her; she was smart and approachable, and she’s had some good experience since. That included being an apparently successful MD of the Co-Operative Farms, which must have required some pretty good negotiation and stakeholder management skills. She is not, I would suspect, a “bang the table and shout” type negotiator, she was seen as being relatively quiet by Mars standards. But then I was too, as it is all relative and Mars did have a tendency to be long on raving extroverts!

With the government also looking at legislation to force firms to publish details of their payment performance, is the tide turning in favour of a bit more thoughtfulness in terms of how large firms manage their supply chain? It would be nice to think so. But going back to where we started, in a sense Tesco is a bit of an obvious target. It will be fascinating to see what the outcome of Tacon’s review of that firm might be, but in a way, it will be even more interesting to see where her second investigation takes her.

And yesterday, the Sunday Times reported that Teso were asking suppliers for price reductions, based on the downwards move in commodity prices. Now we need to be careful here, and not instantly slip back into critical mode. If I was still a CPO, looking at the halving of the oil price, I might also be asking certain suppliers for price reductions. There is nothing necessarily wrong with using a good understanding of your suppliers' cost make-up to negotiate when those costs change. So we'd need to know more about just how Tesco are doing this before we criticise - or indeed praise - them for this initiative.

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  1. Paul Wright:

    Fuel is going down so it seems reasonable to try for price reductions. My wife, commercial director of a transport firm, has a list of those companies who did not accept fuel going up,as a reason for price rises. They will have a harder negotiation. Tesco might find something similar happens.

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