B2B TRADING PRACTICES – A RETAILERS’ VIEW

Christel Delberghe

EESC, 22 June 2016

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Structure

• Retailers in the food supply chain

• Why fairness matters

• The SCI and achievements

• Conclusion

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Retail & wholesale is…

Choice

5.4 MILLION

COMPANIES

1 OF EVERY 7 WORKERS

IN THE EU

10.6%

OF GDP

INNOVATION

• Processes

• Products

• Experiences

Convenience

Clear Product

Information

Affordability

Jobs

Tax Revenue

AND IT PROVIDES…

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Retailers in the food supply chain

• The supply chain is made of many operators, each step adds value

• Retailers do not buy direct from farmers; they do not set the price paid

to farmers

• Retail is highly competitive – consumer have choice and exercise that

choice

• Retail concentration is moderate in most European countries (DG COMP

study on modern retail)

Farmers Wholesale Processors Wholesale Retailers Consumers

Main conclusions of the Commission Retail Study

(1) The concentration of modern retailers at wholesale level

• Most EU member states have low-moderately concentrated modern retail sectors (below 2500)

• The Nordic and Baltic countries have highly concentrated retail sectors (above 2500)

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HHI of Modern Retail sector (2012)

Sources: Planet Retail, EY analysis.

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Retailer margins are narrow

Example: France – decreasing consumption ; narrow net margins on individual fresh product lines

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Retailers have a limited impact on agriculture markets

Example: in Germany, only 37% of milk production ends up in the food distribution chain

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Dominant forces driving the consumer landscape in the next 15 years

Source: McKinsey

Changingface of the consumer

Evolvinggeopoliticaldynamics

New patterns of personal

consumption

Technologicaladvancement

Structural industry

shifts

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Why fairness matters

• Retailers need sustainable and efficient supplier relationships:

Consumer demand

Efficiency

Innovation and differentiation

Costs of disruption

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SCI objectives

• fair business practice as basis for commercial dealings

• Integrate principles of good practice into company day-to-

day operations, and control their application

• Ensure companies address disputes in a fair and

transparent manner

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Ten Principles of Fair Trading Practice

3 General Principles

1. Consumer Interests and

sustainability

2. Freedom of Contract

3. Fair Dealing

7 Specific Principles

1. Written agreements

2. Predictability

3. Compliance with agreements

4. Information exchange

5. Confidentiality

6. Responsibility for risk

7. Justifiable request

Compliance with applicable laws including competition law

The Principles of Good Practice

Agreed by: AIM, CEJA, CELCAA, CLITRAVI, COPA-COGECA, ERRT, EUROCOMMERCE, EURO COOP,

FOODDRINKEUROPE, UEAPME, INDEPENDENT RETAIL EUROPE

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SCI: the commitments

1st commitment:

Respect the Principles

2nd commitment:

Respect the process

1. Consumer interests and

sustainability

2. Freedom of Contract

3. Fair Dealing

4. Written agreements

5. Predictability

6. Compliance with agreements

7. Information exchange

8. Confidentiality

9. Responsibility for risk

10. Justifiable request

1. Registration by European CEO

2. Review and monitor compliance with

Principles

3. Communicate internally, train staff for

compliance

4. Inform business partners

5. Dispute resolution capability

6. Participate in surveys

REMEDIES

Depend on dispute resolution option

REMEDIES / SANCTIONS

Proportionate and gradual

Decided by the Governance Group

(Rules of procedure)

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SMEs are key beneficiaries of the SCI

SME decision (Sept 2015):

Small companies (<50 employees)

Registration

Can participate in annual survey

Medium sized companies (>50 employees)

Light registration procedure

Large companies (> 250 employees)

Full set of commitments

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Towards concrete outcomes: progressachieved Year 2

388 groups/companies registered; 1234 operating companies across the EU

266 SMEs registered (> 50% of total #)

Farmers, wholesalers, processors, retailers

National platforms in 5 countries (BE, NL, FIN, CZ, DE) ; interest & relatedactivities reported in 15 countries

Over 20.000 people trained

A high level of satisfaction (75%) among participants; SCI has helped companies improve their daily communication with their trading partners (44%) and deal with conflicts

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Conclusions

• Supply chains are there to meet a consumer demand

• Retailers need efficient and sustainable supply chains

• SCI a tool to make fair practice to become the norm

• UTP regulation will not solve the agriculture crisis

• We encourage:

A market oriented CAP that respects the single market

Better organised agriculture sector that is more responsive to consumer demand

Structured supply chain dialogue