Grocery Regulator Investigates the Co-op Over Treatment of Suppliers

While drafting a briefing paper recently (watch out for publication in early April), I needed an example of a firm that was doing positive, responsible actions in its supply chain, and was reaping the benefits because its customers seemed to reward that action. Searching around and Googling variants on “corporate social responsibility”, I came across what seemed a good example, I thought – the way the Co-op retail division is managing its suppliers of meat and dairy products.

The Co-op has “created long-term relationships with our farmers and suppliers so that we can give you complete transparency in our supply chain, which is built on honesty, fairness and trust. We have established six Farming Groups, which, combined with a clear sourcing strategy, gives us a great future."

"‘Foundation’ farms provide quality meat and a transparent supply chain. A number of ‘concept’ farms have also been set up, with focus on areas such as welfare, farming efficiency and the environment. This will enable the Co-op to provide 'research and knowledge to farmers to help improve on issues such as disease using new expertise or technology'."

Sounds good, and like-for-like store sales for the retailer were up 3.5% according go the most recent results, out-performing the market comfortably. So we might hypothesise that consumers like to think that the Co-op is looking after its farmers, quite rightly, and respond well to that.

Then just literally a few days after I used that in the paper, this news broke on the BBC website.

“The Co-operative is being investigated by the supermarket regulator over its treatment of suppliers. The Groceries Code Adjudicator (GCA) said there was "reasonable suspicion" the retailer had breached its rules.

It will look into Co-op's "de-listing" of suppliers, and charges levied for comparing and assessing products to put on its supermarket shelves. The Co-op accepted it had "fallen short" and disclosed it had already repaid £500,000 to 110 suppliers”.

The head of the GCA is an old Mars Confectionery colleague of mine, Christine Tacon, and she feels a full investigation is needed to ”consider the extent, scale and impact of practices which may have resulted in suppliers being de-listed with no, or short, fixed notice periods unilaterally imposed by Co-operative Group Limited without due consideration of published GCA de-listing guidance."

Some of the problems seem to have come about when the Co-op was going through a rationalisation of its product listings, which it is quite entitled to do, but it seems it may not have treated suppliers properly through that process. Or perhaps it sees farmers as “strategic suppliers”, worth building close relationship with, while suppliers of commodity packaged goods weren’t seen as being so critical.

Anyway, this is all probably a little esoteric for many shoppers to care about, and rightly, they may feel that the commitments on fresh food are more important. But it is good to see the GCA showing it has some teeth, and that retailers do need to consider how they are treating all their suppliers. And I need to think about whether we still use the Co-op as the shining example in the paper!


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