The role of an effective industry association is to advocate for its members in a strong and positive way. To achieve this, a clear strategy should be developed.
The Food & Grocery Council’s strategy for its 300-plus members has three key planks to it:
- being a strong voice for members
- sustaining a healthy industry, whether that’s around seeking solutions to sustainability issues, attracting and developing talent, encouraging diversity, promoting health and safety, and any other areas identified by members
- delivering membership value.
Part of positive change has to be changing the regulatory framework to ensure improved and transparent supplier / retailer business relationships where there is genuine negotiation.
Over the past 20 years, there has been a significant shift in risk, power, and margin – from suppliers to retailers.
Now, suppliers pay retailers money for things that once upon a time were viewed as genuine retail costs to be picked up by the retailer as part of the everyday business of displaying and selling goods. Now, suppliers take on risks for activities that were once genuine retail business risks.
This has turned many suppliers today into price takers, where they must accept the prevailing market price and sell at that price, rather than being price makers and participating in a negotiation process.
This change in the market is why, for the past 20 years or so, FGC has advocated for regulatory reform to ensure we have a vibrant and sustainable supplier community where everyone benefits. Progress is being made on changing this to ensure there’s more of a level playing field.
Here are three things on FGC’s agenda for this year that will make a difference:
Late last year, the Government ordered the Commerce Commission to undertake a market study into supermarkets. It said it wanted to make sure consumers were getting a fair deal at the checkout, and that there were indications competition in the sector had weakened. It asked it to look at a range of things, including how retailers deal with suppliers, competition between retailers, and how retailers decide on prices. FGC, retailers, and others have made submissions and now suppliers are being asked to take part in a survey to help the commission understand more. You can do that on the commission’s website.
Two amendment bills
The Fair Trading Amendment Bill is designed to introduce new protections against unfair practices by prohibiting unconscionable conduct in trade, and by extending protections against unfair contract terms. The Commerce Amendment Bill is aimed at strengthening prohibitions of the abuse of market power, including amending the test for determining whether a business has taken advantage of market power.
These bills have been promoted and supported by FGC over the past six years. Though they are not a panacea, they will make a difference and will align our laws with Australia.
Grocery Code of Conduct
FGC has delivered a 500-signature petition to Parliament asking the House of Representatives to support a Grocery Code of Conduct for Supermarkets, similar to those in Australia and the United Kingdom, to address potential abuses of market power towards suppliers arising from New Zealand’s highly concentrated retail market. It was presented to MP Greg O’Connor, who said a Code would be good for supermarket owners, because those with good practice would not be disadvantaged by the bad ones because everyone would be working to the same rules.
It’s now with the Petitions Committee who will decide if it wants to hear from FGC. If it does, we will continue to advocate for this as a positive change for the industry. To quote those iconic Pantene advertisements, “It won’t happen overnight, but it will happen.”
FGC is always happy to discuss any of these issues, and you can contact us via our website. New members, too, are always welcome to become part of the work we’re doing to deliver a better and fairer grocery sector.
(originally published in FMCG magazine)