According to the Australian Food and Grocery Council (AFGC), Australia’s two largest supermarket retailers, Coles and Woolworths, have reached an agreement with it to establish what is being called the Food and Grocery Code.
“The Food and Grocery Code establishes a clear set of principles relating to key aspects of trading relationships between retailers and suppliers and will provide greater certainty and clarity about dealings in the industry,” an AFGC statement said.
This agreement comes after more than three years of lobbying by the food industry against the two dominant retailers and their associated market power.
Coles and Woolworths, which together control about 80% of the market, have been accused of squeezing the profit margins of their suppliers and using the strong Australian dollar to sell cheap imports¾many of them under their private labels.
Bringing back balance
Key aspects of the code include tough restrictions on retrospective and unilateral variations to grocery supply agreements and greater transparency on the basis of shelf allocation for branded and private label products.
Also included in the code, reached at the inaugural meeting of the Retailer and Supplier Roundtable in Canberra, is the recognition of the importance of intellectual property rights and confidentiality so as to drive innovation and investment in new products.
The code will also lead to the establishment of a low-cost and fast-track dispute resolution mechanism, the statement said.
The AFGC said that it hoped other retailers and industry groups would agree to the code, alluding to farmers who have not yet come on board with the process.
Voluntary nature not a free pass
Though voluntary, the AFGC has said that the code will be enforced by the federal government under the Competition and Consumer Act, giving the Australian Competition and Consumer Commission (ACCC) greater oversight over the retailers.
Bruce Billson, Australia’s small business minister, told local media at the sidelines of the roundtable that the agreement would be subject to a regulatory impact statement, to ensure the code had “tools and teeth” to manage how supermarkets treated their suppliers.
He stated that it would be pretty vivid and clear if the retailers weren't abiding by their own rules.
“And if that's the case, we've made it clear that the government will act,” he said. “We will ensure that there are proper working and commercial relationships that are fair and mutually respectful.
“Non-compliance would result in government intervention to develop an effective code.”