Tesco UK failings put pressure on Irish Government

Regulations governing retailers in Ireland will be signed into law “soon”.

A spokesman for Minister for Jobs, Enterprise and Innovation Richard Bruton confirmed to the Irish Farmers Journal earlier this week that the regulations are being worked on. Concerns had been growing that Minister Bruton would not sign the regulations into law until after the general election.

The focus on regulation in the retail sector has been heightened by events in the UK this week. UK groceries adjudicator Christine Tacon published her report on the investigation into Tesco plc.

Tacon’s report was damning, claiming Tesco “seriously breached” a legally binding code to protect suppliers to the grocery sector in the UK. Some key points were:

There have been some suggestions already that Tesco is facing a fine of as much as £500m (€660m) as a result of the accounting practices.

Retail power in Ireland

Suppliers contacted by the Irish Farmers Journal are reporting that there has been an increase in the scope and scale of retailer demands in the runup to the introduction of the rules.

The food industry is concerned that the increase in demands may put some businesses, jobs and investment and innovation under threat.

A number of suppliers reported that some of the retail chains in Ireland increased demands for money for “shelf” and “promotional” spends. It is telling that no supplier would go on the record for fear of being excluded from a retailer’s supplier pool.

In December 2014, the minister published the draft regulations aimed at legally controlling the balance between suppliers, retailers and others in the grocery sector.

It followed complaints from suppliers, particularly in the agricultural and food manufacturing sector, that their interests were oppressed as a result of price wars among retailers.

The minister at the time said there is potentially a real inequality between these players which can be abused in a manner that is not in the interests of jobs, consumers or sustainable safe food.

Included in draft regulations were restrictions on payment for shelf space, marketing costs, advertising costs, wastage and shrinkage.

The regulations also aimed to redress the abuses of retailer buying power in the market that can cost suppliers millions on an annual basis.

The Department of Jobs, Enterprise and Innovation has confirmed to the Irish Farmers Journal that the regulations are ready.

The latest supermarket share figures from Kantar Worldpanel, show that 74% of the Irish grocery market is controlled by Supervalu (25.1%), Tesco (24.6%) and Dunnes Stores (24%).

Signs of improvement

Speaking at the Northern Ireland Assembly’s agriculture committee last October, head of agriculture at Tesco Barney Kay said that over the next nine months the average payment time for suppliers will reduce by 34 days. Smaller suppliers that sell less £100,000 a year will move to 14-day payment terms and medium-sized suppliers that sell under £10m will be paid five days sooner than large suppliers.

“We have drawn a line in the sand and introduced new ways of working,” Kay said.

Comments

Paul Kelly, Food and Drink Industry Ireland

“Ireland is the largest market for Irish food and the starting point for every new food business. FDII are calling on the Minister for Enterprise to publish the long-delayed Grocery Regulations to ensure a fair trading environment. The UK, which is our largest export market, introduced similar provisions six years ago.”

ICMSA

ICMSA president John Comer said that findings against Tesco were another small but important step towards what he described as “the very long overdue re-balancing” of power and margins in the food supply chain.

IFA

IFA national chair Jer Bergin said the findings of Christine Tacon confirm that a similar independent ombudsman is needed in Ireland to regulate the grocery retail market. “The adjudicator’s investigation found that the retailer deliberately delayed payments to suppliers and unilaterally paid them less than they were owed in an attempt to meet financial targets.”