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Grocery Guru Ep 22: Retailer Results Season – Will they be Requiring Monies?
Join Andrew Grant and Darren A. Smith in the twenty-second episode of Grocery Guru discussing Retailer Results Season and many of the retailers who are coming to their year-end and negotiations will be tough.
You Can Read the Full Retailer Results Season Episode Transcript Below:
Darren A. Smith:
Welcome to the weekly episode. We’re on number 22, and we’re with the Grocery Guru, that is Andrew Grant. Andrew, hello. How are you doing?
Andrew Grant:
Very good, Darren. Are you well?
Darren A. Smith:
Yes, I’m well, I’m well. This week I think has been a slow news week. So Andrew, what have you got in our post bag for us?
Andrew Grant:
Yeah, it has. I didn’t pick up anything really of much note this week, which is a dangerous thing to say, because it probably means I’ve missed something really important. But no, as you know, we get, what? 12, 15 queries a week, either email or whatever, from clients. And yeah, there’s been a bit of a theme over the last couple of weeks. Obviously, it’s result season, or year-end season, so just about all the supermarkets’ year ends are either between the 1st of Jan and the 1st of April basically.
Darren A. Smith:
Right. Okay. So we’re in results season. So you’re an experienced person, you’ve been through this for quite a number of years. I’m an account manager, let’s say, what can I expect in results season?
Andrew Grant:
Well, it’s one of the things I’ve been getting the most queries about. Is that obviously, most buyers are working at home, a lot of consolidation of buying teams, so fewer buyers Because I always remember when I used to do it, the pressure to get annual terms agreed with all your suppliers. You inevitably start with the very big ones. But there’s then this desperate rush to get the smaller suppliers’ terms agreed before the start of your new financial year.
Darren A. Smith:
Yeah, true. Okay. So if I’m a buyer and I’m in results season, January, February, March, I’m trying to get terms agreed with all my suppliers. How many suppliers might I have?
Andrew Grant:
It depends on the size of the category, but 30 to a 100.
Darren A. Smith:
Okay. So, there’s a lot I’ve got to get done. And these are quite technical, these are legal things [crosstalk 00:02:07]
Andrew Grant:
No, it’s a negotiation. And obviously each year I want a better over rider or I want higher gate fees for those gate fees that you’re allowed to do. So you have to have a to and fro conversation with every single supplier, assuming that every single supplier doesn’t say yes instantly. But the problem that now happens with GSCOP, and this has been where I’ve been getting the calls, is that the biggest single protection a supplier has under GSCOP is that the named retailers cannot do anything that is retrospective. It’s an absolute no-no.
Darren A. Smith:
All right. So let me just understand that. So I’m an account manager, you’re saying that they can’t ask me for stuff retrospectively. They can’t ask me for, now is the 1st of March or whatever it is, I want stuff for February?
Andrew Grant:
Yeah. Yeah, exactly. So, the difficulties buyers are getting themselves into is that they haven’t agreed terms with their suppliers on time. And they’re saying things like, look, we haven’t agreed terms, we’ll roll over this year’s terms, which is allowed, but as soon as we do agree terms, the new terms get backdated to the start of my financial year.
Darren A. Smith:
Okay. All right. And so I understand that, are we talking about this is a Tesco or an Asda thing, is this just their policy or is it something more?
Andrew Grant:
Well, obviously only 13 named retailers are covered by GSCOP. Clearly I’m not going to name who … Our suppliers wouldn’t want us to be divulging which particular retailers it is. And it’s not any one particular retailer actually. So I don’t think it is … It’s not a systemic problem that one retailer is deliberately delaying its terms of negotiations. I genuinely get the impression, it’s very busy buyers with lots of suppliers to talk to, and they’re running out of time. And so they’re then obviously under pressure from their boss and the finance teams to put in place the terms for the new financial year. And some of them are making the mistake of saying, well, we’ll backdate the terms to the start of the year, which is an absolute breach of GSCOP.
Darren A. Smith:
Okay. And that’s where I was going with my question. This isn’t a company policy thing by any of the one or all named retailers, we’re talking about a piece of law?
Andrew Grant:
Oh yeah. Yeah, absolutely. No. It’s an absolute stand up piece of law that they cannot break. And some very interesting discussions. And the reason that account managers have been talking to us is they want to know, how do I use this? And our advice always is, is there any point making a formal complaint and taking one of these retailers through the legal process? Because you as the supplier don’t get much back as a result. However, most buyers will be horrified that they’ve potentially broken the law. And then obviously you’re in a negotiation around terms. So, of course the supplier can agree that we’ll backdate terms. But if I was a supplier, I’d want something back in return fairly meaty.
Darren A. Smith:
Of course. And if one of these 13 named retailers does break GSCOP, and they get found out, what’s the ultimate penalty of this?
Andrew Grant:
The ultimate penalty is 1% fine of their UK turnover. But what you have to remember is the code’s been going since, it’s been law since 2010, it’s had an adjudicator since 2015, and not a single retailer has been fined yet.
Darren A. Smith:
Yeah. Okay. Okay. And we’ve got a new groceries code adjudicator just come in, Mark White. Okay.
Andrew Grant:
Yeah.
Darren A. Smith:
And he’s done a Q&A on our website. All right, cool. Let’s come back to you and the results season, January, February, March, and retailers trying to get money in. You’re saying they can’t do it retrospectively. I’m an account manager, what else should I be looking out for and being concerned about?
Andrew Grant:
No, good point. Because the other thing that is cropping up, as these terms, documents are flying backwards and forwards, the other two biggest watch words in GSCOP, the difference between request and require. So in very broad terms, there’s very little that retailers can require of a supplier, but they can request almost anything.
Darren A. Smith:
Right, okay, got you.
Andrew Grant:
When these potentially retrospective terms documents are flying to and fro, I’m looking at the small print, and it’s amazing where it says things like, on agreement of these terms, the supplier agrees to pay for X, Y, and Zed. That’s a requirement to me.
Darren A. Smith:
Okay. Okay. So we’re getting into some of the gray of the law as to whether that really means require or request. What I’m hearing is three Rs. We’ve got the retrospective one, which you’ve explained to us. Then we’ve got the request and we’ve got the require. So if nothing else, an account manager ought to have their radar up for these three Rs.
Andrew Grant:
Yeah. And as some of our clients quite rightly have been doing, get on the phone to us or get on the email to us, so that we can give them a bit of guidance. Because to me, as I said, it’s not a question of phoning Mark White up and making a formal complaint. I think that could backfire on you.
Andrew Grant:
And we know from all the surveys, that over half the suppliers in the UK are frightened of making a formal complaint in case there’s retribution. I get that. But as I said, I would be using it as part of that to and fro negotiation. Negotiation’s all about relative power bases, all about tradables. If you can put your buyer on the back foot because they’ve made probably an inadvertent mistake, they’ll be horrified when you call that out. And they’ll be much more then open to some form of trading negotiation.
Darren A. Smith:
And that’s sometimes all you really want is just to get the buyer to the table to negotiate. And often it can be hard even just to get that to happen.
Andrew Grant:
Yeah, exactly. Exactly.
Darren A. Smith:
All right. So I’m going to ask you to do two things for us to help the people listening. The first is, would you talk about the written supplier agreement for us please. Because I know that’s important.
Andrew Grant:
Okay. Well, we haven’t got long and it’s not necessarily something you can cover comprehensively. But yeah, the written supply agreement is the heart of any protection you have under GSCOP. And this is why these terms documents become important because it’s not specified exactly what a written supply agreement looks like. It’s not a piece of paper with a great big this is your written supply agreement on it. It is potentially your terms document for next year.
Darren A. Smith:
Okay. Cool. Sorry. Go on.
Andrew Grant:
So, the latest piece of paper, the latest terms document, the latest JBP you have could constitute your written supply agreement. And so, every account manager must go through that, as you’ve just said, with this GSCOP radar pinging in the head for any one of the three Rs.
Darren A. Smith:
And I understand that from the research only one in two suppliers has it, is my research up to date or has it changed?
Andrew Grant:
Oh no, it’s more than that. I do actually forget the number. It’s quite a high proportion. I do remember, I think Aldi and Lidl have the highest proportion of their suppliers with a written supply agreement. It’s in the 80%s. I think as you get down the bottom of the list, some of the newer retailers added to GSCOP, I still think they’re over 50, but don’t hold me to that.
Darren A. Smith:
Okay. All right. So we’ve still got a chunk of suppliers who potentially don’t have a written supplier agreement.
Andrew Grant:
Yeah.
Darren A. Smith:
All right. And the last bit, because I know we’ve only got 60 seconds left, is could you do a pitch for Business Safe, our new GSCOP and competition law product, for me.
Andrew Grant:
You’ll have to just repeat that bit Darren, we seem to have lost you for a second.
Darren A. Smith:
Could you do a pitch to our viewers for our new product, Business Safe, which is about GSCOP and competition law, where we keep them up to date.
Andrew Grant:
Yeah, no, yes, no. So, we do have that new business tool we’ve been working on. Where, I guess, it’s a bit like a doctor’s surgery, isn’t it, or these new internet doctors where if you want to have a consultation with a doctor and not wait in the NHS queue, you get on the app and you can get a qualified doctor to talk to you pretty instantly. Well, we’ve got that when it comes to GSCOP and competition law. Sign up with us and you get pretty immediate access to advice on the very things we’ve just been talking about.
Darren A. Smith:
Perfect. Andrew, thank you again for your guru-ness.
Andrew Grant:
No problem.
Darren A. Smith:
We’ll speak next week.
Andrew Grant:
Take care.
Darren A. Smith:
Bye-bye.
Take a look at the Retailer Results Season video on our YouTube Channel. Also, check out our award-winning blog.
