Inflation has 'weakened' UK retailer-supplier relationships

The pressure from rising prices has strained relationships between suppliers and retailers, the GCA says
The pressure from rising prices has strained relationships between suppliers and retailers, the GCA says

Inflation has weakened the relationships between the UK’s retailers and their suppliers, the Groceries Code Adjudicator’s sector survey reveals.

A quarter (26%) of suppliers said they had experienced a refusal by a retailer to consider a request for a cost price increase (CPI) or an unreasonable delay from the retailer in concluding the request.

It is the most raised issue in the GCA’s surveys over the last five years. Overall, 80% of suppliers had asked for at least one CPI in the previous 12 months.

After year-on-year improvements in retailer-supplier relationships to 2021, the survey now shows a fall in the number of suppliers not facing any Code-related issues from 56% in 2021 to 47% in 2022.

The 2022 survey results suggest that following the pandemic where retailers and suppliers worked closely together and improved their relationships, the pressure from rising prices has strained relationships, and Code-related issues between the two have risen.

In response to these difficult conditions, retailer performance is mixed. Aldi returns to the top of the leader board with a score of 98%, and in total, five retailers either improved or maintained their score despite sector challenges.

However, the other eight retailers have seen falls (of up to 11%) in the way that their suppliers have scored them.

Mark White, the current GCA said: “Inflation has affected the entire groceries sector as witnessed by the sheer scale of requests from suppliers to increase prices.

“I am concerned that the pressure has impaired relationships and created wider problems. My priority is to work with all the retailers to ensure they treat their suppliers fairly as they navigate the cost price process during this difficult time.

“It is also important that suppliers confidentially report any issues they have so I can take them up swiftly with the retailers.”

There were more than 2,500 responses to the 2022 Groceries Sector Survey – the 9th conducted by the GCA.

The survey shows reduced Code-compliance compared to the previous year. Only 47% of suppliers have experienced no Code-related issues compared to 56% in 2021.

And 8% of suppliers raised an issue with a retailer in the past 12 months which is, despite the fall in the number of suppliers without any Code-related issues, consistent with the 2019-2021 results.