Tesco has apologised for “unsustainable and harmful” practices with its suppliers after the UK Groceries Code Adjudicator found the retailer “seriously breached” the Groceries Supply Code of Practice drawn up to govern dealings with manufacturers.
Christine Tacon, the Groceries Code Adjudicator, said between 25 June 2013 and 5 February 2015, Tesco “had acted unreasonably when delaying payments to suppliers, often for lengthy periods of time”.
Go deeper with GlobalData
She has now ordered Tesco to introduce “significant changes” to its practices and systems in the way it deals with payments to suppliers.
Tacon said she was “concerned” Tesco had made unilateral deductions from suppliers, about the length of time taken to pay money due to suppliers and in some cases an intentional delay in paying suppliers.
She said: “The length of the delays, their widespread nature and the range of Tesco’s unreasonable practices and behaviours towards suppliers concerned me. I was also troubled to see Tesco at times prioritising its own finances over treating suppliers fairly. My recommendations will deal with the weaknesses in Tesco’s practices during the period under investigation.”
Tacon and her office launched an investigation into how Tesco deals with suppliers last February. At the time, Tacon said she had decided to look into the relationship between Tesco and manufacturers after weighing up information given to her related to practices associated with the retailer’s over-statement of profits, which was announced in September 2014.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataIn a statement on Tesco’s website, CEO Dave Lewis said the findings were “consistent” with the retailer’s own investigation into its dealings with suppliers, which it opened in the wake of the profit over-statement.
“In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry,” he said. “We accept the report’s findings, which are consistent with our own investigation.”
Lewis said Tesco had since made changes to the way it works with suppliers, although he acknowledged there was more work to do.
“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed. In January 2015, we made material changes to our business that addressed the majority of the historic practices referred to in the report. We have changed the way we work by reorganising, refocusing and retraining our teams and we will continue to work in a way which is consistent with the recommendations.”
“We have made a lot of progress, but there is still more we can do. Today our colleagues are empowered to do the right thing for our customers and for our suppliers, and I am extremely proud of the way they have responded over the past year.”
Tesco claims the “overwhelming majority” of its suppliers are more positive towards the company today compared to the period under investigation. It has implemented initiatives to improve the way it works with suppliers including publishing its payment terms with its suppliers and introducing payment terms of 14 days.
It has also set up a helpline for suppliers to solve any issues which might arise, within 48 hours.
