The pain of a delisting

Analysis

The decision by a major supermarket to remove, or delist, a supplier's products from their shelves is fairly common and considered all part of the cut and thrust of business in the UK's £151bn grocery market.

However, Duncan Swift, a UK food supplier business turnaround expert, estimates that the overwhelming majority, or about 80 per cent, of delistings relate to a retailer not taking forward a supplier in a re-tendering process. The remainder of delistings, estimated at about 20 per cent, take place for other reasons from the collapse of a supplier to "unreasonable buyer behaviour", says Mr Swift. "It is relatively uncommon for a supermarket to otherwise unilaterally delist a supplier's products." Of course, the delisting of a small supplier can cause them to fail.

In theory, delistings are covered by the Groceries Supply Code of Practice, which was introduced in February 2010. However, the code is open to interpretation, as it merely states a "retailer may only delist a supplier for genuine commercial reasons". That said, it does state that a retailer cannot just delist a partner because they have had an argument.

Similarly, GSCOP only says that a supermarket must provide "reasonable notice" period to a supplier of their decision to delist and not a set timeframe.

Mr Swift says this period is typically two to three months, but he argues it would be fairer if it was made to be a month for every year of supply. Unfortunately for suppliers – particularly small farmers as opposed to multi-nationals – there is no regulator to enforce any breach of the grocery code.

Despite the fact that the Competition Commission recommended an ombudsman in April 2008, the legislative timetable means that the watchdog, to be known as the Groceries Code Adjudicator, is unlikely to start work until the summer of 2013.