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Policies & Issues: Food

Grocery Supply Chain
In a highly competitive sector, all retailers know the importance of good supply chains to their businesses. Consumers demand high quality available produce when they go into their supermarket and retailers can only guarantee that by having a long term, sustainable relationship with their suppliers. It simply isn't in their interests to exert excessive pressure on their suppliers as is sometimes suggested. Our recent paper on investment in farming demonstrates how we are committed to UK farmers in the long run. We have an efficient, productive agricultural sector and we are doing everything we can to help farmers invest in the future and arm them with the necessary research to make the right decisions for both their businesses and the environment.

It is also worth remembering that, contrary to popular belief, our supply chain is not dominated by small businesses and farmers. Our main direct suppliers are large, often multinational companies. Very few farmers supply supermarkets as their produce is processed by much larger companies, such as dairies, who sell to retailers.

Retailers want to invest in their supply chains to ensure consistency of product and to help producers grow their businesses with them to keep pace with consumer demand. A good example is the huge growth in ethical and fair trade products over the last decade where, thanks to retailers working directly with producers, the range and value of sales has increased rapidly putting millions of pounds back into communities.

Retailers, although their contracts are usually with processing companies, give the UK farming sector huge support. Their use of UK produce and clear labelling to help consumers make an easy choice is exemplary. They give huge backing to Assured Food Standards (the "little red tractor") which appears on millions of packs of fresh meat and produce in their stores and is worth billions of pounds in sales. This support is helping UK farmers promote their products to consumers. They are also working closer with producer groups to get more of the value back to the farmer. The dairy supply chains are a good example of this, where retailers consistently pay the highest prices to dairy farmers whose milk is sold in their stores.

Retailers have the most regulated supply chain in Europe. The recent introduction of the Groceries Supply Code of Practice (GSCOP) means contracts between the top 10 food retailers and their suppliers are regulated to outlaw issues raised in the Competition Commission's grocery inquiry, and crucially offer suppliers the right to independent arbitration if they require it. We believe that strikes the right balance between competitive negotiations, which benefit all consumers and the rights of suppliers. GSCOP has operated since 2010 and to date no supplier has applied for arbitration to resolve a dispute with their retailer.

We have opposed the establishment of an adjudicator to oversee the operation of GSCOP as we felt it was unnecessary based on problems within the code and would add unnecessary costs to the supply chain. We acknowledge that Parliament supports its creation and our key plea is that its role is strictly defined, that it is fair to all parties and that its costs are strictly controlled.

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