David Prosser: We're the ones squeezing out the suppliers
Thursday 14 January 2010
Outlook Whoever wins the election, the writing is on the wall for the supermarkets, with both Labour and the Conservatives now signed up to the idea of an ombudsman to police the relationship between the sector and its suppliers. The "enforcer" will rule on breaches of a code of practice – in theory preventing those nasty giant supermarkets from driving hard-working small businesses (think vulnerable farmers) into the ground.
It's a nice idea, but what difference will the plans make? After all, we've had a code of best practice governing relations between the supermarkets and their suppliers for some time, but operating on a voluntary basis. Not a single grocer has ever been found to be in breach of it. So the supermarkets are all thoroughly decent folk, or the rules aren't up to much. Either way, making the code compulsory isn't going to make much difference.
The Government itself insists that its proposals aren't going to have much impact on the prices that consumers pay in the shops. In which case, why is it bothering? Does it imagine, somehow, that the supermarkets are going to take the hit from the ombudsman's rulings as it tries to protect suppliers? No, the Government is right because there isn't going to be a hit.
The difficulty with this industry is that the competition to supply it is so cut-throat. Suppliers to grocers are prepared to accept whatever terms of business they are offered. And for each one that says no, there are several more prepared to step into the breach.
The responsibility for that lies not with the grocery sector itself but with consumers, who consistently vote with their feet. If everyone who claimed to support small butchers, bakers and candlestick makers got round to shopping on their local high street occasionally, rather than trouping out to the massive supermarkets they apparently dislike so much, the grocers might not be so profitable. But people like the value and convenience that supermarkets offer, so they support the system to such an extent that the supply chain can be squeezed.
There was a good deal of bleating from the supermarkets yesterday, which feel duty-bound to protest about the ombudsman. They have a point in their claim that the biggest beneficiaries of the increased regulation are likely to be the largest suppliers to the sector. And they are even more justified in complaining about the bureaucracy coming their way. After all, it is almost two years since the Competition Commission first recommended that the Government take this step and we still don't even have final proposals.
Still, if the retailers are unhappy now, wait until a Tory government arrives. It accuses Labour of not going far enough and promises much tougher action on the grocers. So much for the party of big business.
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