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Preliminary GSCOP Survey Results & Sainsbury’s Range Reset
Join Andrew Grant and Darren A. Smith in the thirty-second episode of the Grocery Guru. They discuss the preliminary results of the latest GSCOP supplier survey, whilst the announcement of the Groceries Code Adjudicator’s concern about Sainsbury’s range reset and how they are dealing with their suppliers.
You Can View the Full Preliminary GSCOP Survey Results Transcript Below
Darren A. Smith:
Hello, and welcome to episode 32 of The Grocery Guru. We are here with that guru. That is Andrew Grant. Andrew, how are you?
Andrew Grant:
Morning, Darren. Yes, very well. Enjoying this lovely, lovely weather we’re having.
Darren A. Smith:
We are having lovely weather. So now lovely weather, moving on to regulatory stuff. There’s a lot going on in the media right now, The Grocer and others, and I think you’re going to tell us more about it.
Andrew Grant:
Yeah, no, we’re always trying to keep up with what’s happening out there in grocery world. And this week, it is quite interesting, you feel sorry for the politicians sometimes, or maybe you shouldn’t, but they go from hero to zero in a flick of a finger. I think with this government it’s been the other way around; they go from zero being blamed for the whole pandemic, even though I don’t think it was quite their fault, to now suddenly being heroes because of the success of the vaccine rollout. And the flip of that is the grocers, as we’ve been reporting for the last 30-odd episodes, I mean they really pulled out every stop during the pandemic; they kept the nation fed, they’ve kept us safe, they’ve spent gazillions on repurposing their stores, et cetera.
And what happens the minute we’re now seeing light at the end of the tunnel of the pandemic, Morrison shareholders veto David Potts’s bonus, I’m sure a very well-earned bonus. So yesterday 70% of the shareholders vetoed his bonus for all the hard work that they praised him for during the pandemic and then the Grocery Code Adjudicator, Mark Davis, the new kid on the block-
Darren A. Smith:
Mark White?
Andrew Grant:
Sorry, Mark White, sorry. Yes. Mark White. Where did Mark Davis come from? Mark White. Yeah, he published his Annual Supplier Survey, praising Sainsbury’s for topping Aldi to the top of the tree. So ever since the survey has been done, Aldi had been top of the tree. Sainsbury’s number one this year; 97% compliance, according to suppliers, with the code. So well done, Sainsbury’s.
Darren A. Smith:
That’s very good to top Aldi, as you say, they’ve been top of the tree for a very long time. I sense a “but” coming.
Andrew Grant:
I was just to say but Mark has now, with the same breath, almost the same press release, announces he’s concerned about Sainsbury’s range reset, having heard from a number of suppliers about allegedly non-code compliant practices. So yeah, Sainsbury’s are doing a range reset, most of the retailers have post-pandemic, because, as we’ve been talking about, shopping habits have changed.
Darren A. Smith:
Yes, [inaudible 00:03:11], of course they have.
Andrew Grant:
But yeah, he’s been approached by a number of Sainsbury’s suppliers alleging that Sainsbury’s are giving very short notice of D-lists and, I can’t quite believe this number but it’s in the press, it’s black and white, asking for up to 20% of a supplier’s sales turnover as a range reset or business fee.
Darren A. Smith:
And I read that too; 20%. So if you are a 5 million pound supplier end-sales, you need to hand over 1 million pounds as a lump sum to keep your business?
Andrew Grant:
Well, it’s more than that. If you think of some of Sainsbury’s biggest branded suppliers and you can name those as well as me, they will have 100 million pound businesses. Are they really going to hand over 20 million quid? I don’t think so.
Darren A. Smith:
They’re not. They don’t make the profit of 20 million quid on it. So that’s an odd one and I’m not quite sure whether that’s based in a single small supplier. I suspect it is, I don’t know.
Andrew Grant:
I mean, you can remember back to our day, I mean, in a industry where the margins are sub 5%, you’re lucky to get one or two percent, and then you think you’ve been very successful, been pushing it. So yeah, I find that 20 very, very strange.
Darren A. Smith:
I agree. So what do you think will happen over the next coming weeks in terms of Mark and Sainsbury’s and suppliers? Can you predict, yes?
Andrew Grant:
Well, obviously now Mark has gone public saying he has a concern, I imagine that flood gates will open. And you can imagine the poor old bars in Holborn sort of hunkering down, going through every single email they’ve sent in the last six months and worrying, I guess. They’re doing their job, but obviously the code is there for a reason, but it is very, very strange, isn’t it? That Sainsbury’s get voted 97% compliance and yet all of a sudden there’s a problem.
Darren A. Smith:
And Andrew, what do you think we’ll see from Sainsbury’s? Yes, their hunkering down, they’re trying to make sure they’re absolutely [inaudible 00:05:31], they’re probably not in some places, they’re going to have to chat with Mark. What else is going to happen with supplier’s range reset, do you think?
Andrew Grant:
I don’t think it will stop Sainsbury’s in what they’re doing. I think the language will be a lot more careful. I’m sure the legal team will be working over-time with the commercial department, but I don’t think it will change. I mean, it’s business. But it is interesting, isn’t it? That it’s… I’m just trying to find the figure here. I think only 6%, in the Grocery Code Survey, I think only 6% of suppliers said they had a problem with any of the named retailers. The lowest since the survey’s being done.
And the only issue that had increased was payments for better positioning of products.
Darren A. Smith:
Right.
Andrew Grant:
Which sort of speaks to range reset, actually. It’s going to be interesting to watch it over the next few weeks and months, what happens because obviously Mark’s, what? Six months in past his classic 100 days, if I was him, I’d be wanting to make a bit of a mark for myself.
Darren A. Smith:
Mark makes a mark.
Andrew Grant:
Mark making a mark, I guess. I see what you did there. Yes. This is his opportunity.
Darren A. Smith:
So let’s step back. What do you think is happening to our industry? I would guess in more regulated, we’re becoming more compliant, we’re accepting this stuff. Although it’s taken us 10 years for it to come in and the code to become effective. What do you think is going to happen?
Andrew Grant:
Well, I think this is, we’ve talked about it in previous episodes, there’ll be… we’re moving into a new normal, the supermarkets for all they’re success during the pandemic and now having to live with the reverse of that. So they’re having to live with last year’s massive sales-peaks. And even though we’ve got the football coming up and they’ll sell a lot of beer this weekend, I don’t think that’s going to make up for the whole nation being locked down and ordering… basically only having the grocers to shop in.
So quite naturally their commercial beasts they make, as we’ve said before, very, very… In the face of it, very, very low profits; 2p in the pound, typically. They’re having to work with their suppliers, I think that’s the phrase to use, “Work with their suppliers,” to move themselves on commercially. So on the flip of that, you’ve got suppliers who have equally been impacted by the pandemic. They may have seen very healthy volumes as the retailers did, but massive costs to keep going during the pandemic, Brexit costs, labor problems as we talked about last week, a perfect storm of cost increases.
And so you’ve got those two immovable objects coming together; retailers needing more money this side and suppliers needing cost price increases this side. There’s going to be tension and that’s probably what Mark has been picking up.
Darren A. Smith:
And do you think we will see more back-lash, more investigation, more suppliers reporting on supermarkets of their practices over the last year, as they perhaps wrestle with the pandemic and deal with stuff with speed?
Andrew Grant:
Yeah. As I said, I think it’s a bit like my politics analogy in reverse that we started with, is everybody hunkered down, be it suppliers or retailers, and they kept the nation fed, and fair play to them. Now, obviously we’re getting back to some semblance of normality, people are looking to leverage that advantage, to improve that position or whatever phrase you want to use, and so I think there will be more noise around this. I think if you look at that survey and say that, whether it’s Sainsbury’s or Co-Op or Aldi, 90 plus percent compliance with the code is pretty good.
I think the lowest, very lowest, Iceland, was 90%. So that’s the thing, that’s from the suppliers own mouths. It’s a completely confidential survey so they’ve got nothing to worry about. And so the suppliers are saying that the supermarkets are incredibly compliant. So I think it’s around the edges. There’s always going to be, if you have a range reset, there’s going to be losers. Those losers may feel, rightly or wrongly, that they’ve lost out as a result of some regulatory mishap.
I’d be surprised if it becomes a big major news item. I think it’s the noise caused by the natural friction of negotiation. That’s quite the phrase.
Darren A. Smith:
I like that, it’s a good phrase. All right. One last question for you, Andrew, and think about the preliminary GSCOP results survey, how many supply agreements are there in place now? Because it was running around one and two. What is it now?
Andrew Grant:
Yeah, I don’t know if you got ahead of me on this press release because it is only a press release rather than the full details of the survey. I don’t think it’s mentioned in there. Obviously for us the interesting thing that we always look at is what percentage of suppliers said they’ve had training on the code because it was less than half, just less than half, to my memory. That would be in the main body of the survey when it’s published, this was just a press release yesterday. So maybe we come back to it in a couple of weeks time.
Darren A. Smith:
We’ll come back to it, you’re right. We’ll come back on two things; what percentage of suppliers have written supply agreements, that’s absolutely critical for them because then you get more adherence to the code; and the second part is how many have had training, how many understand it? While suppliers aren’t bound by the code, we would like to help suppliers understand it, so that they can help their buyers.
Andrew Grant:
Absolutely.
Darren A. Smith:
All right. Okay, Andrew, just before we go, what’s your final take away for our viewers out there?
Andrew Grant:
I think it’s, if what we’ve been talking about for the last 10 minutes, Grocery Code Adjudicator and GSCOP has being, what on earth are they talking about? And you’re a supplier, find out because there is… the Groceries Code is a very genuine piece of protection for suppliers, but it’s not automatic, if that makes sense. It’s only if suppliers uphold their rights. Do they get those rights? If they are either through ignorance or whatever, don’t know what GSCOP is, then they won’t be protected.
Darren A. Smith:
Very true. Andrew, you enjoy the rest of the day. Thank you for your guru-ing. I will see you next week.
Andrew Grant:
Bye-bye.
Darren A. Smith:
Take care.
Take a look at the Preliminary GSCOP Survey Results video on our YouTube Channel. Also, check out our award-winning blog.
