Inching closer to a statutory grocery code of conduct and independent ombudsman
With the Oireachtas Joint Committee on Agriculture, Food and Marine calling for a statutory code of conduct in the grocery sector alongside an independent supermarket ombudsman, Gillian Hamill reports on what the implications of the report are likely to be for the country's major FMCG operators
Print23 October 2013
A distinct feeling of déjà vu has – for several years now – been the unfortunate hallmark of discussions centred around the introduction of a statutory grocery code of conduct. As ShelfLife publisher John McDonald commented earlier this year: "Where is the long awaited and much needed "Code of Practice for Grocery Goods Undertakings"? Why has it not been finalised and adopted? What has dampened the enthusiasm within Minister Bruton’s department to bring this long "almost ready" piece of work over the line?"
Action could be on the cards
Well, according to Andrew Doyle, chairman of the Oireachtas Joint Committee on Agriculture, Food and the Marine, we might finally be about to see some action.
According to the TD, the report, which calls for the introduction of a statutory code of conduct in the grocery good sector, underpinned by an independent supermarket ombudsman, holds an important advantage over the draft Fair Trade Bill published by Fine Gael in 2009. Whereas Fine Gael were the sole architects of the 2009 draft bill, the 2013 report is a cross party venture which has support from "all sides of the house". According to the committee, this will "make it a lot easier for the Minister" to bring a bill over the finishing line.
Bill just weeks away
In fact, Deputy Pat Deering said on the topic of timelines for the subsequent Consumer and Competition Bill that, "we’re down to weeks at this stage".
Naturally, with a bill facing an apparently imminent arrival, the assembled journalists were keen to learn more about what it would actually mean for cash-strapped consumers. Would they be forced to bear the extra cost burden involved? It was also suggested that the committee appeared to be "extra critical" when it came to the subject of own-brand products.
Chairman Andrew Doyle replied that the report recommended a ban on the below cost selling of staples such as milk and bread, as well as recommending the introduction of a minimum pricing order on the sale of alcohol.
Better labelling for own-brand products
He conceded that while own-brand products were not "bad" per sé, that they did give "a lot more power to retailers to drive down prices", which was why the report recommends all own-brand goods must have a prominent display detailing the processor code and country of origin of the product.
Deputy Éamon Ó Cuív referred specially to milk in his response to this line of questioning. He noted that out of every litre of milk, a farmer now receives 11 cents less than they did in 1995, and said the recommendations would result in greater transparency over what each involved party was gaining in terms of margin. "Own-brands [currently] fly totally in the face of transparency," he added.
Will consumers pay more?
Similarly, other deputies were not convinced that the ban would in fact lead to higher prices for consumers. Amongst them was Deputy Michael McNamara, who said that average food prices were already 17-18% higher in Ireland than other countries, even with below-cost selling occurring.
He argued that although staples such as bread and milk were cheaper due to below-cost selling, that supermarkets transferred the costs onto other consumer goods and charged more for those products in order to make up the shortfall. He said this is "disproportionately affecting producers", such as the milk producer who only produces milk and is subsequently forced to take a hit on their margin.
Multiples disclosing profits
Unsurprisingly, the question of why multiples are not required by law to disclose their profits in the Republic of Ireland was raised. "That’s not for me to speculate," said Doyle initially. However he quickly followed this up by adding: "It should be available here so we have transparency". He said multiples would claim that the cost of doing business was higher in the south but it had previously been shown, for example, that the cost of energy was actually dearer in the north. He then referred to a leaked document which he said had called Ireland "the honey pot" of the industry. "Maybe that’s it," he offered.
Other committee members were keen to follow up on this theme. According to Éamon Ó Cuív, there was an "easy answer" to the question of profits – publish them! "We won’t jump to conclusions, [but] we’re very curious, we’d love to know their profits," he intimated. If the supermarkets had "nothing to hide", there was "no reason" why they couldn’t reveal their profits, he added.
Will supermarkets take a hit?
Another question posed by the press was whether the committee accepted that large multiples would be prepared to take cuts if the proposals were introduced, in order to keep prices low for consumers? There is "a market tolerance out there all the time", said Doyle. He argued that if the consumer could afford to pay more, then they would, but if they couldn’t, then yes, multiples would have to take "the squeeze".
It was also claimed by the committee that the multiples all said they already had "very robust structures" in place, and that the subsequent costs involved for them under the new proposals shouldn’t be "very big".
Radical changes?
So what does all this mean for Ireland’s grocery market and its major players? Ultimately, if the proposals are implemented – as the committee believes they will be – this could lead to radical changes within the sector. If multiples are forced to reveal their profits, consumers will for the first time ever, be able to make a truly informed decision about where they do their shopping.
Independent retail group RGDATA was amongst the first to welcome the report. "RGDATA is delighted that the recommendations made in our submission and our presentation have been adopted by this cross party committee. In particular we welcome the recommendation that the large multiple retailers like Tesco, Aldi and Lidl should reveal their profits in Ireland. We urge the committee to ensure that all of the recommendations are implemented.This will be in the best interests of consumers, competition, local shops and fairness and transparency in the grocery sector," said RGDATA director general Tara Buckley.
NFRN Ireland has also welcomed the government’s announcement that it intends to introduce minimum pricing for alcohol products and publish its proposals as part of the National Substance Misuse Strategy. NFRN Ireland president Joe Sweeney said the move would allow small independent off-licence retailers to "compete on a level playing field".
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