Wow – what a year that’s coming to an end!
Usually at this time we’re saying, ‘let’s put that one behind us, have a decent break and start afresh next year’, and be relatively sure that will happen. But this year I’m afraid it’s not going to be that simple. There are just too many ongoing issues in the food and grocery sector that will feel like rocks under our towels over summer.
That’s for suppliers who are still in business. Let’s not forget those whose main trade was food service and who suffered greatly as tourism shrank to almost nothing. For many of them, Christmas could be a lot bleaker than usual and not just because of disrupted global supply chains.
Sure, most of the issues can be blamed on Covid-19 and the response to it, but that’s not the full story.
The year started well, with supermarket shelves well stocked across Christmas and January, but in February, reports of illness and panic-buying in China were ominous. So it proved. As Covid-19 spread and panic buying started in Europe, many of our manufacturers were dusting off their emergency preparedness plans in anticipation of a spike in demand should it reach our shores. This was the advice from the Food & Grocery Council too, well in advance of official edicts.
When our first case was confirmed in February, and consumers continued to pantry-load (some of it panic-buying), manufacturers were ready, and supermarkets began increasing orders. But despite FGC assuring consumers the vast majority of products would continue to be available, and we would never run out of food, the rush didn’t stop.
It was to the great credit of everyone in the supply chain – farmers, packers, manufacturers, suppliers, logistics workers, merchandisers and supermarket staff at all levels – that serious glitches were few. FGC, Woolworths NZ and both Foodstuffs were in regular contact to head off gaps in supply. There were further glitches in August when Auckland returned to lockdown. The need for checkpoints at the borders and confusion over the definition of vital manufacturing roles resulted in small shortage issues for a couple of weeks.
But having got through all that, we’re now faced with fresh problems that could mean product and ingredient shortages at Christmas and beyond.
Surges in global consumer demand, clogged northern hemisphere ports, and industrial action in Australia is creating havoc for import and export businesses. As I write, the strikes are forcing shipping companies to by-pass our smaller market, and to cancel dedicated trans-Tasman services. Containers for exports are also in short supply.
Recently, a meeting of 400 FMCG suppliers was asked if they were facing supply chain disruption, and three-quarters raised their hands.
Logistics companies tell me the supply chain is under stress, and delays are going to make the end to a tough year even tougher, as supermarkets will likely have difficulty ensuring stock levels at the busiest time of year. And the logistics companies don’t expect improvement until March.
It’s gone from low demand halfway through the year and ships not required, to a boom and not enough ship space, containers and slots. Local ports are under pressure and extra penalties and surcharges penalise suppliers for congestion. The result is likely to be additional costs on top of already high-season rates, and some products could become uneconomic. Logistics experts tell me all suppliers can do between now and March is take a deep breath, expand their time horizon expectations, and add major buffers into planning.
There is one other rock under that towel: retailer-supplier relationships. They’re simmering again after issues around Foodstuffs North Island’s new buying model implementation process and variable success as the new system settles in. Suppliers are keen for the changes to have a positive impact and from this point it’s up to the retailer to prove the model works for suppliers and is not just another cost for less activation.
Like many things in business, it’s not what but how things are done. For many suppliers the negotiations weren’t really negotiations and more of a ‘sign here or face the consequences’ approach. It’s issues such as this, combined with other factors over the past decade, that have contributed to the united view of suppliers that it’s time for a Grocery Code of Conduct in New Zealand.
Australia and the United Kingdom found positive changes for business dealings after the introduction of their Codes, which ruled out some egregious behaviours immediately and laid the foundation for better retailer/supplier relationships.
Faced with demands, bullying, questionable charging, retrospective money demands, and other dubious behaviour by a couple of handfuls of stores, suppliers want to be able to point to a Code and remind buyers of the framework that rules out such behaviour. Many stores already have good practice and good relationships, but for some there will need to be positive change in the way they treat suppliers and conduct their businesses. Questionable claims, deletions used as a threat, and forcing payment for theft and shrink will be just some practices under continued scrutiny.
Let’s hope 2021 sees a New Year resolution that sorts this out to everyone’s benefit.
(as published in Supermarket News)