Can supermarkets meet their GSCOP obligations while still boosting profits?

Posted Thursday 30th January 2020

Supermarket suppliers have often found themselves at the sharp end of the UK’s fiercely competitive grocery market, bearing the cost of price cuts or promotions as chains battled for customers.

With the growth of Lidl and Aldi exerting further price pressure on the market, it is no wonder that the issue of supplier relations is back in the press. If recent reports are to be believed (The Grocer, 10 January 2020) Tesco is looking to boost profits by increasing margins from suppliers, including raising prices for promotional spaces and gondola ends.

While it has not been said that Tesco is in breach of its obligations under the GSCOP, the shift may raise concerns that Tesco is slipping back into old habits in terms of its relationships with suppliers, which first came under fire in 2015.

With pressure on the major supermarkets to increase profits in the face of mounting competition from discounters, a renewed focus on profit margins may mean a squeeze on suppliers across the board. While there is nothing wrong with commercial discussions about boosting margins and reaching targets, supermarkets need to be careful that any changes stay on the right side of the GSCOP.

Falling foul of the GSCOP may have significant financial and reputational costs for supermarkets but can be devastating for suppliers. At Joelson we recognise the pressures on suppliers to the major supermarkets and can offer commercial, practical advice on changes to supply agreements and decisions to delist.

We can provide timely advice to minimise the disruption to your business which can flow from decisions made by the supermarkets.

This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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