Ultimate Guide – Groceries Supply Code of Practice – GSCOP

The Ultimate Guide to GSCOP

Welcome to the Ultimate Guide to GSCOP. We hope this helps explain exactly what the Groceries Supply Code of Practice is. Also, how it affects your relationship(s) with the big supermarket groups.

We are here to help you, the suppliers to the UK grocery trade. We want to help you to sell more and to make more in your dealings with supermarkets.

In this guide, we have striven to be as comprehensive as possible. However, no static, written piece can cover every possible variation of interaction you have with your most important customers. So, please do get in touch with us with your specific issues and problems.

This Ultimate Guide to GSCOP will deliver answers and understanding to the following. You can jump to the sections with the links below:

• What is GSCOP?
• Where Did It Come from and Why?
• GSCOP:# Myths and Misunderstandings
• Who Are the Designated Retailers?
• How Doe#s GSCOP Work?
• The Groceries Code Adjudicator
• How Do I Make A Complaint?
• Who Does the Groceries Supply Code of Practice Cover?
• Which Products Does GSCOP Cover?
• What’s in the Groceries Code?
• Is the Groceries Code and its Adjudicator just a Toothless Watchdog?
• How Many GSCOP Investigations Have There Been?
• How to Further Improve Your GSCOP Knowledge
• Further Reading and Resources

What is GSCOP?

GSCOP, the Groceries Supply Code of Practice is a piece of UK government legislation. It puts certain restrictions on the purchasing activities of the very biggest supermarket chains. The intent of the legislation is to protect suppliers from some of their more extreme buying practices. It’s sometimes called ‘Grocery Supply Code of Practice’, and ‘Groceries Supplier Code of Practice’. But more on those inaccuracies later.

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GSCOP: Myths and Misunderstandings

Many myths and misunderstandings have grown up around GSCOP. Possibly, because only 41% of suppliers in the Adjudicators own survey said they had a ‘good understanding’ of GSCOP. Moreover, 50% had still had no formal GSCOP training.

Perhaps the biggest misconception surrounding GSCOP is that suppliers cannot be in breach of it.

Many suppliers confuse GSCOP with Competition law. A very different beast. One which suppliers must be aware of and take great care with, as costs of a breach are severe.

In addition, GSCOP only covers ‘designated retailers’. It is only those retailers that GSCOP binds. As a supplier, you do not need to worry about or fear breaching GSCOP. You cannot.

Test how well you know the Groceries Code with our online quiz.

Who Are the Designated Retailers?

To be classed as a designated retailer, a company’s UK grocery sales turnover must be greater than £1billion. Because of this, the list can change. Currently, there are 13 in the UK:

We shall see in detail later, but GSCOP does not cover all retailers and all categories. It is a ‘Groceries Code’. It covers the government’s, or perhaps an out of touch civil servant’s view, of what a ‘supermarket’ is. And, what constitutes a ‘grocery’ product. As a result, the Groceries Supply Code of Practice does not cover all retailers. Including those with more dubious buying practices, that would most certainly be in breach of it. Moreover, you, as one of their suppliers, have no legal redress against them under the Groceries Code.

Introduction and Implementation

As we shall see shortly, the successive governments that introduced and implemented GSCOP were keen to keep food prices low. They didn’t want anything to prevent the big supermarkets from fighting ongoing price wars and keep food inflation low. As a result, there is absolutely nothing in the Groceries Supply Code of Practice to stop a designated retailer using its market share muscle. They are still free to demand forward-facing cost price reductions from their supplier base. The only caveats being that the demand should be ‘fair’ across all suppliers and without ‘duress’. Try proving a supermarket is in breach of being  ‘fair’ and that you were put under ‘duress’ in a courtroom!

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How Does GSCOP Work?

GSCOP seeks to regulate certain aspects of the commercial relationship between supermarkets and suppliers. It aims to prevent potential abuses. This is due to the huge imbalance of power in the UK grocery supply chain as explained earlier.

The Groceries Code is overseen by an Adjudicator. An official appointed by the government to oversee the implementation, running and effectiveness of GSCOP. Under the supervision of the CMA, (Competition and Markets Authority), an Adjudicator was appointed in 2013.

Why a 3-year delay in appointing an Adjudicator is the obvious question? Well, it’s down to political reality rather than necessarily the needs of poor hard done by suppliers, farmers and producers.

The Labour government that introduced GSCOP in 2009 became the Conservative-Liberal Democrat Coalition following the general election of May 2010. As well as perhaps not needing or wanting to pander quite so much to the lobbying voice of rural communities, the government realised (and was lobbied itself by the BRC (British Retail Consortium) representing the supermarkets), that actually supermarkets in the UK do a pretty good job of keeping food prices down. This, in turn, keeps inflation low, which in turn keeps the biggest lobbying group of them all – the electorate – happy!

Keeping Prices Low

Average nett profit margins for the UK supermarkets are around 2% or 3%. Put very simply, for every £1 the supermarkets take out of the supplier base by whatever means, fair or potentially foul, 97p or 98p goes to the consumer or shopper in the form of lower prices

Little wonder then that the government whilst wanting to show some sympathy for the (genuine) plight of farmers and small producers, did absolutely not want to do anything to stop the big supermarket chains knocking lumps out of each other on price.

The result was twofold. Firstly the Groceries Code was ‘watered’ down to not overly restrict the supermarkets’ ability to drive down retail prices. In short, to prevent undermining the current efficient and low-cost supply chains.  Secondly, rather than appointing an Ombudsman with sweeping regulatory powers (think OFWAT, OFCOM, OFTEL), an Adjudicator with fewer powers of control was put in place.

To learn more about how GSCOP works, take a look at our helpful infographic below. Click the image for a higher resolution:

The Groceries Code Adjudicator

The Groceries Code Adjudicator is a part-time government salaried position. It’s currently occupied by Christine Tacon who has been in place since the Adjudicator position was first created in 2013.

Her role is to ‘Arbitrate, Investigate and Fine’. As of 2015, she gained the power to fine retailers in breach of GSCOP 1% of their UK turnover. However, she has as yet to impose any such sanction.

The Groceries Code Adjudicator comprises an office of 6 full-time equivalent staff. Funding for its running costs comes from an annual levy on the designated retailers.

Read more about the GCA in our 2019 GSCOP Annual Conference Review.

Read the Code Confident Pack from the new GCA – Mark White.

How Do I Make a Complaint?

Now, for one of the most strange and bizarre aspects of the Groceries Code legislation. As a supplier, you cannot automatically invoke a formal complaint against a designated retailer directly with the Adjudicator. You must first approach the alleged offending retailer.

It’s the grocery equivalent of a back ally mugging late at night. Yet, instead of being able to call the police, you have to go back and politely ask the person who just mugged you for your money back!

Strange but true! The only way of invoking a formal, legal complaint under GSCOP is to approach the ‘Senior Buyer’ for the category in which you operate. The ‘Senior Buyer’ must be a named commercial contact inside the designated retailer. Furthermore, they must feature as such in your written supply agreement.

Should you not be satisfied with the response or outcome of your complaint to the Senior Buyer your second port of call is to the designated retailers ‘Code Compliance Officer’. Again, a named, specific individual inside each designated retailer who cannot be part of the commercial buying structure. Typically, in most instances are part of the corporate legal or secretariat team.

Once alerted to a dispute they legally have 21 days to find a resolution to your issue. At which point, and only then, can you formally approach the Adjudicator with your complaint.

Unsurprisingly you can count on the fingers of one hand the number of formal complaints the Adjudicator has received since coming into office. The Adjudicators own annual supplier survey in 2015 cited that 68% of suppliers would not raise a Code issue with a retailer for ‘fear of retribution’.

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Who Does the Groceries Supply Code of Practice Cover?

GSCOP doesn’t cover all supermarkets and all products. Initially, only 10 ‘designated retailers’ with grocery sales above £1 billion were covered by the legislation: Tesco, Asda, Sainsbury’s, Morrisons, Aldi, Lidl, Co-Op, Marks and Spencer, Waitrose and Iceland.  Two more were added in November 2018, B&M and Ocado. Finally, Home Bargains was added in September 2019.

Which leaves a whole host of retailers with large food businesses, many over the £1 billion threshold, not covered by GSCOP. Therefore, not subject to any restrictions on the way they conduct their commercial relationships with their suppliers. For instance, WH Smith Travel, Boots, Amazon, Poundland to name but a few.

GSCOP covers all suppliers whether or not UK owned and based who supply a designated retailer in the UK. It also covers all wholly-owned subsidiaries of a designated retailer. So, Booker became covered by the Code when Tesco purchased them in 2017.  As did NISA when Co-Op similarly purchased them. The Groceries Supply Code of Practice does not, however, cover retailers with supply agreements with designated retailers. For instance, Costcutter has a supply agreement with Co-Op but are not covered by the Code. Similarly, it does not cover McColls, despite having a supply agreement with Morrisons.

Which Products Does GSCOP Cover?

Technically, not all products are covered by GSCOP. It is a ‘Groceries Code’. The legislation stipulates that it covers, food, pet food, toiletries, household, cleaning and drinks. However, many other things that large supermarkets sell are not covered. This includes tobacco, petrol, books, plants and flowers, perfumes and cosmetics, cards, clothing, kitchen hardware, electricals, news, magazines and books, cards, audio and video, toys and gardening.

In practice, most of the designated retailers, both for practical purposes (buyers move categories regularly) and for full transparency cover all the products they sell under their GSCOP obligations.

However, a word of warning, if you are a supplier in one of the non-covered categories. If you do not have a written supply agreement that encompasses the Groceries Code, you may find it very difficult to get any form of redress, from either the designated retailer or the Adjudicator in the event of a dispute.

What’s in the Groceries Code?

The Groceries Supply Code of Practice has 14 sections that cover specific aspects of a nominated retailers’ dealings with suppliers of grocery products.

We will now briefly examine each one.  We will give you a broad understanding of what each one means and how it may impact upon your day to day dealings with those of your customers covered by GSCOP.

Do remember, however, as previously mentioned we cannot cover here every nuance and detail of GSCOP. Or how in individual circumstances it may affect you. Please do get in touch, or fill out the form at the end of this guide, if you have any questions, queries or concerns. We are here to support and help.

Retailers Shan’t Request Retrospective Changes:

Whilst they can ask or request that you make changes to your supply chain arrangements with them, for instance, delivering to additional RDC’s, shorter order to delivery lead times, different booking in times etc. They cannot impose them upon you without consultation and without giving you reasonable notice. 

Retailers May Only De-List a Supplier for Genuine Commercial Reasons:

Your written supply agreement with a designated retailer must explain clearly their de-listing process. Furthermore, it should also contain your rights to appeal either directly to them, to their Code Compliance Officer (CCO), or to the Groceries Code Adjudicator. They must also give you reasonable notice of a de-list. In practice, most of the retailers covered by GSCOP have settled upon 6 months as the minimum notice period. This is not just for de-list as a supplier, but for product delists, and, in some cases, ranging reductions (number of stores a product is listed in).

A Retailer Must Pay a Supplier for Groceries Delivered to That Retailer’s Specification in Accordance with the Relevant Supply Agreement:

This is one of the more straightforward elements of GSCOP. Designated retailers must pay their suppliers to the terms set out in the written supply agreement provided the goods supplied are to agreed specification. However, GSCOP does not stipulate how long payment terms should be. The number of days credit you give a customer is an important part of the initial negotiations you have with any of the designated retailers under GSCOP.

No Obligation to Contribute to Marketing Costs:

This is a huge area of traditional and potential cost for suppliers. Many of whom do not realise that they do not have to necessarily pay for many things that retailers ask of them.

The key here is the difference between Request and Require. For example, designated retailers cannot Require (or force) you to pay for the following:

• Point of sale
• Consumer research
• Hospitality
• Travel
• New store openings

They can, however, ask or Request that you invest in these things. Furthermore, if that Request is in your written supply agreement, and you have signed it, then you become automatically obligated.

It is, therefore, vitally important that you understand what you have signed up to in your supply agreements with designated retailers under GSCOP.

Remember, a written supply agreement may be deemed to be a Joint Business Plan document, an own-brand specification document, or even a retailer’s standard terms and conditions of business on their website or supplier portal.

This area of the Groceries Supply Code of Practice is probably the least clear. It’s the most ambiguous and it is, therefore, open to all sorts of interpretation and potential abuse. So, please do speak to us here at MBM if you are in any way concerned that you may have signed up to any significant investments with designated retailers that you are now unhappy about.

A Supply Agreement Must Not Include Provisions Under Which a Supplier Makes Payments to a Retailer as Compensation for Shrinkage:

This is the clearest, black and white section of the Groceries Code. Thanks possibly to the lobbying power of the likes of Proctor and Gamble and Unilever. Designated retailers under GSCOP simply cannot, full stop, either Request or Require that you as a supplier make any payments for shrinkage. Shrinkage being any losses due to theft or damage incurred once they have taken delivery of the goods and the title has passed.

A Retailer Must Not Require a Supplier to Make Any Payments to Cover Wastage Unless Such Wastage Is Due to the Negligence of That Supplier:

GSCOP treats wastage a little differently to shrinkage. It is a demonstration of the lobbying power of the supermarkets during the consultation phase before GSCOP became law.

Whilst supermarkets covered by GSCOP cannot either Request or Require any payment for shrinkage, they are able to Request payments for wastage. Product(s) that are reduced to clear or thrown away because of low or no remaining shelf life.

During the consultation phase of GSCOP, retailers successfully argued that if they were not able to share the cost of fresh food wastage with suppliers then they would not be able to take the risk of launching quite so many products. As a result, choice, and more importantly, (to the government) prices would be affected!

Once again, the overarching importance of that written supply agreement is paramount. Check what you have or have not agreed to. Be sure to check joint business plan documents, own brand specification documents and terms and conditions documents.

Limited Circumstances for Payments as a Condition of Being a Supplier:

Again, a potential area of misunderstanding and confusion for may suppliers. Even for the press, and also, the Groceries Code Adjudicator!

According to GSCOP, designated retailers can Require that suppliers pay for their products featuring in promotional space.

This again is the result of the influence and power of the retailers’ lobbying of government. The retailers’ argument was simple. If they were unable to charge for promotional features, they would do fewer promotions and prices to consumers would be higher!

Retailers cannot Require any payments for better space or positioning of your products. For example, an eye-level shelf, off fixture display, end cap, foyer display. But, the writing of GSCOP allows them to Request payment from you. And, of course, you as a supplier are free to offer payment for better space. In fact, it is the interest of many big brands to do just that. Offer to pay for branded space and feature in-store.

A Contentious Publication

This became quite contentious back in 2015. Following the publication of a buyers letter to suppliers offering hot spot space in return for payment. The letter was leaked to and published by the Grocer and, subsequently, the Daily Mail. As a result, the Groceries Code Adjudicator was asked for comment. Christine Tacon said she was ‘minded’ that such an approach for payment was ‘not in the spirit of GSCOP’.

The result was that there was no investigation or fine for the retailer in question. It was not a technical breach of the law. However, the power of the Adjudicator to ‘mind’ that it was in breach of the ‘spirit’ of GSCOP has led to changes. It led to almost all of the retailers covered by the Groceries Supply Code of Practice amending their buying practices. They no longer ask for such payments, or to include them in supply agreements, even if suppliers offer them of their own volition.

A Retailer Must Not, Directly or Indirectly, Require a Supplier Predominantly to Fund the Costs of a Promotion:

This is an important element of GSCOP, especially for own-brand suppliers. Designated retailers under the Groceries Code cannot Require that you fund more than 50% of the cost of any promotions you do. They can, of course, ask or Request. You, once again, need to check what you have signed up to in your written supply agreement with them.

No Unjustified Payment for Consumer Complaints:

If you ever read the Groceries Code, you will find that this is the hardest element to understand. Both in terms of its wording and meaning. However, what it boils down to is relatively simple. Simply put, designated retailers cannot charge excessive amounts for customer complaints.

You are entitled to the analysis and explanation of every single customer complaint. But, in practice, this would grind both businesses to a halt. So, pragmatically, GSCOP allows retailers to include in your written supply agreement an average sum for each customer complaint. This sum is in proportion to their overall costs of handling customer complaints. In practice, this has now meant that none of the designated retailers charges more than £25 per customer complaint.

Due Care to Be Taken When Ordering for Promotions:

A somewhat outmoded element of the Groceries Supply Code of Practice. Possibly an example of how the government and civil service when drafting legislation do not fully understand how industries operate.

GSCOP does not allow retailers to over order promotionally priced or funded stock that they then sell after the promotion at the higher, non-promoted price.  This is to prevent a financial stock gain, know historically in the trade as ‘stock bouncing’.

In the past retailers covered by the Groceries Code would have promotional ‘buy-ins’ of at least 2 weeks before a promotion. And sometimes even a week after! The Groceries Supply Code of Practice seeks to stop the use of this practice to over-order stock to then make a financial gain.

In practice, it almost no longer happens in the designated retailers covered by GSCOP. They have all moved to ‘trigger funding’. Whereby any promotional investment by the supplier is only ever ‘triggered’ when the promotion is actually redeemed by the shopper scanning the product and paying for it at the checkout.

A Retailer Must Fully Compensate a Supplier for Any Cost Incurred by That Supplier as a Result of Any Forecasting Error in Relation to Grocery Products and Attributable to That Retailer:

This is the biggest potential ‘barn door’ in the Groceries Supply Code of Practice.  The one element that must have made the retailers that GSCOP applies to go white with fear!

As written into the legislation it is open season for any supplier to claim compensation for any supply chain costs caused by an inaccurate forecast by a designated retailer. These include costs of extra deliveries, overtime or buying emergency stocks when forecasts are too low or wasted stock, unused equipment and wages paid for no work when forecasts are too high.

Each of the retailers covered by GSCOP, not unsurprisingly, very quickly moved to ‘shut and bolt’ the ‘barn door’. They added phrases such as ‘all forecasts are provided in good faith and with due care’ to their written supply agreements, email footers and general terms and conditions of business.

No Tying of Third-Party Goods and Services for Payment:

This element of GSCOP refers to third party goods and services. These include:

• Artwork houses.
• Demonstration and sampling agencies.
• Technical audit and inspection service providers.

Those who the designated retailers keep in return for a royalty or commission, in order to be the sole (service) provider for that retailer to its suppliers.

As a result, suppliers are forced into having to use an often overpriced supplier of third-party goods and services. Even if they have a perfectly competent and cheaper alternative that they already use.

The key to any challenge under this part of the Groceries Supply Code of Practice is the following: Firstly you must prove that the retailer does indeed receive a royalty or commission payment from the provider. Then, you also have to prove that your alternative provider can meet the quality and specification requirements of the retailer at a cheaper price.

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Is the Groceries Code and its Adjudicator just a Toothless Watchdog?

The Adjudicator, Christine Tacon has taken a very sensible and pragmatic approach to her tenure.

She would have very quickly realised upon taking her position that the phones would be very quiet and her email inbox very empty. Suppliers would be, quite rightly, very reluctant to raise any issues for fear of retribution from very powerful supermarket groups. Even more so when the legislation dictates that the victim has to approach the very person that mugged them in the first place for any redress!

So, she has embarked on what she has self-styled a ‘collaborative approach’ with both suppliers and designated retailers.

By offering anonymity to suppliers that approach her directly and then pooling their problems into ‘top issues’ she has used the Code Compliance Officers to raise generic industry issues within the designated retailers and persuaded and cajoled them into change without having to resort to the imposition of any of her legal fining powers.

She has succeeded in getting designated retailers to stop forensic audits going back any more than three years. She has got designated retailers to agree to stop unfair drop and drive charges and related invoice payment delays and she has got agreement for better transparency in how forecasts are generated, and promotions planned.

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How Many GSCOP Investigations Have There Been?

During her term, she has conducted two formal ‘investigations’ into designated retailer breaches of GSCOP. The first one in 2015 into the Tesco ‘financial accounting scandal’. The second and most recent one, last year into the Co-Op group.

In both instances whilst finding evidence of both organisations to be in breach of the Groceries Code, she did not invoke her formal powers to fine them up to 1% of their UK turnover. Preferring instead to maintain their cooperation and willingness to change for the better. Rather than risking a long, protracted and costly legal process.

Retailers are continuing to work with the Adjudicator to genuinely improve their buying practices and relationships with their suppliers. The cynics amongst you will no doubt ask why? The ever so slightly cynical response is that the designated retailers know that as GSCOP is currently written and as it is being currently policed it is absolutely in their interest to work with it.

As we have seen there is absolutely nothing in GSCOP to stop a retailer using its market share buying power to leverage lower prices. So, why would a designated retailer, by definition those with the biggest market shares, want to be seen to be not working with the Groceries Code? Just in case by not working with it a government, present or future, decides to really crack down and restrict the way they operate through price controls or some such mechanism.

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How to Further Improve Your GSCOP Knowledge

At Making Business Matter, we are passionate about helping you, the suppliers to the UK supermarket trade. We want you to sell more product successfully and to make more money in so doing.

We hope that this guide to what at first glance is a perplexing topic has been enlightening. Hopefully, it has given you more confidence in your own knowledge and grasp of the subject.

The Groceries Code is there to help you. It has and is making a difference in the way big supermarkets treat their suppliers. Make the most of your new-found knowledge. Ensure you have or know what constitutes your written supply agreement. Lastly, make sure you are happy it works for you and your business.

If you are not happy it does, speak to Making Business Matter:

Groceries Supply Code of Practice Training

There are Groceries Supply Code of Practice training courses available. You will find MBM listed in the directory of GSCOP training providers on the government services and information website.

At MBM, we prefer to save you £500 and a day of training by offering you a book. A strange statement coming from a training provider. It is because we believe in the importance of this legislation. Moreover, we believe that you can achieve your goals by reading the book fully. That way, it is easier to reference back to when you need it. To complement the book, we also offer a 2-hour Masterclass with its author, and MBM founder, Darren A. Smith. 

Our recommendation is to buy the book, attend the Masterclass and then combine that knowledge with Influencing Skills and/or Negotiation Skills training. Alternatively, take a look at our full range of training products.

e-Learning

In addition to the book and Masterclass, we now also offer a reasonably priced e Learning course. This product consists of 3 x 20-minute modules. Each module will require a pass mark of over 80%. We envisage only 7 in 10 passing this online course. Included in the course will be views from supermarkets, and access to over 25 x 1-minute videos.

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Further Reading and Resources

You can find further insight, detailed definitions and clarification of all the key GSCOP terms mentioned in this guide in our Glossary of Terms. Additionally, check out our GSCOP page for further resources.

GSCOP Book

To find out more about your rights under GSCOP, take a look at some extracts from the GSCOP Book. Written by our very own founder, Darren A. Smith, the book is designed for you, people that work in the UK Grocery Industry. Specifically, Sales Directors, Category Managers, and National Account Managers to major UK supermarkets. By providing a comprehensive overview of your rights under GSCOP, it helps you to understand the ‘rules of the game’.

Buy the GSCOP Book – Click Option 1, 2, or 3

For £9.95 you can buy the 74-page book on either:

1. Digital book from Amazon.co.uk (Read the 4.5/5 reviews)
2. Paperback book from Lulu.com
3. Preview on Google Books

GSCOP Aware Association

The GSCOP Aware Association has been formed with one mission: To be the mark for Suppliers to demonstrate that they are GSCOP Aware. Joining is based on passing an online assessment regarding GSCOP that we envisage two-thirds will fail.

GSCOP Videos

Watch our GSCOP playlist from our YouTube channel:

Watch the Groceries Code Adjudicator, Christine Tacon, speak to suppliers:

Contact Us

Feel free to get in touch to find out about how GSCOP Book Author Masterclass with book author Darren A. Smith can help you improve your knowledge of GSCOP. Simply visit here to contact us or email us at helpme@makingbusinessmatter.co.uk, and we will be happy to get back to you.