A dent in your wallet

Let's leave the price increases and rising profits of both supermarkets and multinationals aside for the moment. Far more painful and often unnoticed by consumers is the pain suffered by a typical food producer as a result of the pinching behavior of the buyers from the supermarket organizations. 

It doesn't matter who they are dealing with. Blue, yellow, red or discounter; they are all equally bad. It's the manufacturers who get hit where they don't want to: their wallets.

'We are the cheapest!'

This is what almost all supermarkets are currently crowing about. Price checkers like the Consumers Union and Foodwatch sometimes show that the loudest screamers are actually the most expensive supermarkets. It is often difficult to verify who is right. There is certainly a lot of shouting. Not only in the advertising brochures, but especially behind closed doors where price negotiations take place. 

Shameless

Naturally, purchasing values are confidential and therefore extremely non-transparent. A tour among manufacturers clearly shows how shamelessly the terms are drafted. Legally, nothing seems wrong because both parties are entering into an agreement. However, there is one big catch. The terms must not violate the brand-new 'OHP' (Unfair Commercial Practices Act) that went into effect on Nov. 1, 2021, ratifying EU Directive 2019 633. This new law is food for thought for keen lawyers who, in my opinion, can declare many supermarket procurement contracts invalid for being in violation of the law. This is similar to the idea of me drawing up a contract with my neighbor to split the loot from our bank robbery 50-50. After a successful outcome, I only give him 10%. The neighbor has no leg to stand on because our contract is against the law.

Examples of unreasonable provisions

• Payment terms of up to 90 days are completely unreasonable. An exception of 30 days is still sometimes made for small businesses. Everything you see as a consumer in the supermarket, is not even their property while you are allowed to pay directly. This creates a huge profit for the supermarket at the expense of that of the producer who has to have a difficult conversation with the bank because his solvency is compromised. 
• Waiting periods for raw material price increases and short correction times for falling prices. Well, in that case the producer should have negotiated better prices on the forward market. Companies requesting a price increase are put on hold for several weeks. "We'll call you back." This is one reason why some products temporarily disappear from the shelves. The supermarket is then dried out, is what they call it.
• Extra costs for the producer. Those are numerous. Quality costs of around 1%, co-paying for the brochures, giving extra discount for the " get 2 and pay 1" actions. Additional research on the products is charged. These are often amounts with more than three zeros.
• Requesting a correction invoice that includes a new payment deadline. A very nasty trick that can take up to 100 days to pay.
• Having independent audits performed at the producer's premises, despite having certificates from the well-known food safety schemes such as BRC and IFS that were originally designed to avoid unnecessary audits. The bill, of course, is paid by the producer. 

In my book, "Lies on My Plate," I pay extensive attention to purchasing conditions starting on page 13. 

How can this be improved?

• Quite simply by purchasing relationally. If there is a healthy working relationship between seller and buyer, many problems can be resolved quickly, often by telephone. Basic requirement is that the buyer understands the products he is buying. This is often totally absent. Such a category manager rotates with other colleagues to the point that no healthy business relationship is allowed to develop, it seems. The dairy buyer moves on to cosmetics after a few years and later on to bread and pastries. To cover up the incompetence, very bulky contracts fueled by distrust are drawn up. A typical contract quickly covers 400 pages. Do you have a minute to discover the changes in the new contract?
• By encouraging transparency in the chain. Even with the producer, the structure of the cost price will have to be clear along with the desired profit margin. 
• Switch to ISO 22,000 with the FSSC 22,000 program attached. This has many advantages, which I will return to in the next edition of trade magazine Voedingsindustrie.

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