Co-op replaces £8m Christmas dividend with food vouchers

Organisation says half-year payments to members unjustifiable in light of near collapse of banking arm

The Co-op has unveiled a new rewards scheme after being forced to abandon its usual pre-Christmas dividend for seven million members.

The UK's biggest mutual organisation told delegates at a meeting in Manchester on Saturday that £8m in half-year payments to members could not be justified in light of the near-collapse of its banking arm.

The full-year dividend, which last time amounted to more than £100m, is likely to go the same way after the group made a loss of £559m in the first six months of 2013. A final decision will be made early next year.

Chairman Len Wardle said at the group's half-year meeting: "Our decision not to pay an interim dividend was not one that was taken lightly. But it was viewed by the board as a necessary one, given the challenges facing the group at this time."

The Co-op has announced details of a separate rewards scheme that will see members offered 10% vouchers that can be saved and used as a cash equivalent in the group's 2,800 food stores before Christmas Eve.

If a Co-operative member spends £30 they will be given a voucher worth £3. Vouchers can be collected between 18 November and 15 December.
Chief executive Euan Sutherland said: "Technology now allows us to offer these more immediate rewards, which we are confident our members will appreciate in the run-up to festive period."

The Sunday Times said that a review of the Co-op's donations to the Labour party will form part of a strategy rethink being undertaken by Sutherland as he also attempts to reduce the group's £1.3bn debt pile.

He said in an interview with the Sunday Times: "Part of our strategy work, and we will come back with it next May, is to ask, where and how should the Co-op movement be contributing to local society and to community movements?"

He added: "Being a mutual is not an excuse for not making money. My intention is to make decent profit out of the Co-operative Group. What we then do with that profit is different."

The Co-op bank's rescue plan announced last week will see around 50 branches close and bond investors including US hedge funds given 70% of the business, leaving the parent Co-operative Group with a 30% stake.The controversial move comes after a £1.5bngap in finances was discovered following the purchase of the Britannia Building Society and abortive plans to buy hundreds of Lloyds branches.

The Co-op business also includes supermarkets, pharmacies and a chain of funeral parlours.

Article Source : http://www.guardian.co.uk
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UK discount supermarkets aim Christmas campaigns at middle-class

Lidl runs first-ever nationwide British TV adverts, while Aldi doubles size of Christmas range, including fresh lobster

Britain's two biggest discount stores will be taking their battle to attract middle-class shoppers on to the small screen this Christmas as Lidl launches its first ever national TV advertising campaign on Thursday.

Lidl's ad for its Deluxe range, featuring whole cooked lobster and mini Stollen, will run on several channels including ITV, Channel 4 and Sky. The company is increasing the number of products in its luxury selection by two-thirds in an effort to lift sales by 50% to nearly £64m.

Aldi will launch its festive campaign on Monday having doubled the size of its Christmas range this year to include fresh lobster tails and a fresh version of its three-bird roast, which has been a popular frozen item in recent years.

Lidl originally introduced its Deluxe range as a speciality for Christmas but rapidly expanded it last year when sales nearly doubled to £40.2m compared with £19.5m in 2011. This year Lidl is adding 200 new products to its Deluxe range including Serrano ham and a British fresh bronze turkey. They will sit alongside 300 existing luxury favourites including reindeer and caviar.

Lidl managing director Ronny Gottschlich said: "Our Deluxe products have proven to be our best selling, along with our Comte de Brismand champagne, which speaks volumes for what our customers want. We feel now is the time to fully showcase the quality of these products."

The move comes as Lidl and its fellow German discounter are stealing market share from major supermarkets including Asda, Tesco and Morrisons as shoppers search for a way to save cash.

The retailers now control nearly 7% of the UK grocery market, up from just under 6% a year ago according to data from Kantar Worldpanel.

Aldi, which has been promoting its luxury foods in press and television advertising campaigns for several years, has been outgrowing its closest rival. The retailer, which opens its 500th store on Thursday, increased sales by 31.7% in the 12 weeks to 14 October while Lidl's sales rose by 13.1%, according to Kantar.

Meanwhile, the number of shoppers using Aldi for their main weekly shop has soared 31.7% in the past year, according to the research firm Verdict. It also suggests that the proportion of well-off shoppers visiting Aldi has more than doubled to 4% year on year as nearly a third, 32.3% of the shoppers using Aldi for their main shop this year have switched from shopping at rival grocers in 2012.

Andrew Stevens, food and grocery specialist at Verdict, said: "Aldi has been the biggest winner in terms of switching and shopper number growth in 2013. This has been largely driven by shoppers switching to Aldi from the likes of Tesco and Asda."

The largest proportion of Aldi's new fans came from Tesco, which is not surprising given that it is by far the UK's biggest supermarket. The biggest switch, relative to its share of the market, came from Asda, at 19.7%.

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Tesco's profits sliced by almost a quarter in past six months

UK's biggest supermarket experiences falling sales in every country in which it operates and sells fewer property assets

Tesco's profits crashed by nearly a quarter in the last six months as the UK's biggest supermarket suffered falling sales in every country in which it operates. Underlying sales slipped back as the grocer struggled to cope with widespread economic problems and a worldwide shopping shift away from the large hypermarkets, historically favoured by Tesco, to local corner shops and the internet.

A large slice of the decline was the result of Tesco selling fewer property assets than a year ago, but even excluding that, profits fell more than 7% to £1.4bn. The biggest decline was in Europe, where profits fell by more than 70%. Analyst Clive Black at Shore Capital described that decline as "atrocious".

Tesco admitted it faced "continuing challenges" as it attempts to improve its image with British shoppers and reshape its international business after an ambitious expansion programme.

"There's a massive shift in retail," said Philip Clarke, the chief executive, as he revealed that Tesco was now operating online grocery stores in 50 cities in nine markets outside the UK and planned to focus on opening smaller stores in nearly all its territories.

The profit slump in Europe, excluding the UK, is particularly painful. Slovakia, Hungary and the Czech Republic face continuing economic pressures and Tesco admitted it had got its strategy wrong in Poland and Turkey, where underlying sales dived by 6.4% and 12.8% respectively over the last six months compared with the same period a year before.

There were further problems in Asia, with profits in South Korea dented by £40m as a result of tighter government rules on trading hours.

Yesterday Tesco confirmed plans to put its 134 Chinese stores into a joint venture with the state-backed China Resources Enterprise. The UK retailer will pay £345m for a 20% stake in the joint venture, which will require state approval.

The move is a humiliating reversal for Tesco, which had huge ambitions to expand in China. Clarke revealed that its underlying sales in the fast-growing market had declined by 3% and the venture lost £72m in the past six months alone. The company said it had spent more than £1.3bn on assets in China and had made trading losses of more than £70m in each of the last two years as it tried to forge a role in the massive market.

The Chinese joint venture is part of Clarke's strategy to stem mounting overseas losses. He has also pulled out of Japan and has axed the US business, which has cost £1.7bn in investment and trading losses. Tesco is selling its California-based Fresh & Easy chain to billionaire Ron Burkle.

Tesco is reviewing its operations in the Turkey and India, but Clarke said the company was committed to its other international operations. "We chose to exit Japan and the US because we had small market shares in markets with very strong competitors. The path to profitability would have taken far too long. They were developed markets, but developing markets bring with them good market growth," he said. Clarke added that the European businesses had strong market shares and would pick up when the economic environment improved.

"Tesco's chief executive must be thinking about entering the Rio Olympics' weightlifting competition given the amount of 'heavy lifting' that he has had to engage in over the last three years," said Clive Black. "More training is going to be required before the corporate bar feels less heavy."

Finance director Laurie McIlwee said Tesco would "start to approach" its aim of about 5% growth in profits next year as trading improved in the UK, which is by far its most important market.

He said profits in the UK would improve as it moved out of shop space devoted to electrical products and concentrated on more profitable items such as toys, health and beauty, and stationery. "I don't think it's getting worse. We are making the right moves and will make strong progress in the second half of the year," McIlwee said.

Tesco is battling to stem falling market share and underlying sales in the UK by investing more than £1bn in revamping stores and improving customer service. Yesterday, however, it admitted that so far, underlying sales remained poor – down 0.5% for the half-year as the supermarket faces tough competition from upmarket rivals such as Waitrose and Marks & Spencer as well as discounters such as Aldi and Lidl.

But Clarke insisted sales were improving, as they had been flat in the second quarter. He said food sales had risen 1% as customers welcomed improvements to 8,000 products over the past 18 months and the Price Promise promotion, under which shoppers receive vouchers if they could have bought a basket of items cheaper at any of Tesco's three main rivals.

Online sales also continued to grow strongly, up 13% in the half, as Tesco rolled out drive-through collection points to nearly 200 locations.

Rival's success
Sainsbury's 'quality and service' underpin improved sales growth

While Tesco has problems in almost every part of its empire, rival Sainsbury's unveiled a step up in sales growth over the summer.

The UK's third largest supermarket said underlying sales – which exclude benefits from new store space – were up 2%, excluding fuel, in the 16 weeks to 28 September, as it successfully fought off competition from discounters and larger rivals Tesco and Asda.

Enjoying his moment of glory over rival Tesco, chief executive Justin King said that Sainsbury's was out-performing the market because of "great standards of service and availability in stores" and its investment in high-quality own-label products.

He conceded that virtually all of the supermarket's shoppers were likely to visit discounters such as Aldi and Lidl, which have been enjoying rapid growth in the past few years. But he said that some of Sainsbury's best-performing stores were situated close to Aldi outlets as the supermarket was able to offer prices that were "pretty sharp" on the same quality of goods.

The retailer's in-house brands such as Taste the Difference and By Sainsbury's grew at twice the rate of third-party brands as shoppers looked to save money. Clothing sales were also strong, growing at twice the pace of food.

Sales growth at convenience stores stepped up from 15% to 20%, which King attributed to the warm summer weather. However, online sales growth slipped back from 20% to 15% and King suggested that shoppers had preferred to be out in the sunshine rather than waiting at home for deliveries.

Sainsbury's position in the fast-growing online and convenience-store sector as well as its emphasis on quality – which kept it out of the horse-meat scandal – has ensured that the chain is the only one of the UK's "big four" grocers to increase market share in the past year.

Looking forward, King said he was encouraged by signs of economic recovery, but added: "The reality is household budgets are under pressure. Inflation is 3% and wage rises are barely 1%.

"We know by listening to customers that they continue to find challenges in their weekly budget, and shopping habits they developed in the downturn are likely to persist."

In that environment, Sainsbury's is expecting shoppers to switch to own-label and enjoy a "stay at home" Christmas as they continue to try and save money in a tough market.

Mike Coupe, Sainsbury's commercial director, said: "We think it will be a stay-at-home Christmas. Because Christmas is on a Wednesday we think people will have an extended holiday and spend time with their family."

King said he still expected strong spending in December as shoppers were saving money on their weekly shop so that they could splurge on special occasions.

Price competition between the supermarkets remains stiff and Sainsbury's is continuing to pursue a complaint about Tesco's Price Promise promotion, which claims to compare the cost of goods at rival chains, even own-label items.

The advertising watchdog has ruled that it is not unfair for Tesco to compare its own-label bananas with Sainsbury's Fairtrade ones, but the ruling is being appealed.

King said: "We think there is an important principle here, that it should not be for any individual retailer to determine whether they consider what they sell to be comparable. We believe the comparisons Tesco are making ignore the quality difference between our products."

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Tesco rapped for implying horsemeat scandal affected whole food industry

Supermarket's ad at height of crisis tarred all food retailers and suppliers when relatively few instances had been identified, says ASA

Tesco has been criticised by the advertising watchdog for claiming that the horsemeat scandal affected the entire food industry.

The Advertising Standards Agency (ASA) ruled that an ad run by Tesco in February, at the height of the food crisis, "implied that all retailers and suppliers were likely to have sold products contaminated with horsemeat" when "relatively few instances of contamination had been identified at the time".

The ad now banned by the ASA, entitled "What burgers have taught us", said: "The problem we've had with some of our meat lately is about more than burgers and bolognese. It's about some of the ways we get meat to your dinner table. It's about the whole food industry."

Two people, including an independent butcher, complained that the ad was misleading because it implied there were issues with meat standards across the whole food industry, unfairly denigrating suppliers who had not been involved in the supply of mislabelled products.

The news comes at a sensitive time for the UK's biggest supermarket as it attempts to rebuild its reputation and market share in the wake of the scandal and problems with customer service. It recently launched a high profile ad campaign called "Love Every Mouthful" in a bid to highlight the quality of its food after promising to source more meat from the UK and Ireland and step up testing to avoid future contamination.

Tesco's share price plummeted in January after tests carried out by Ireland's food watchdog identified traces of horsemeat in burgers sold in its stores, as well as Iceland, Aldi and Lidl.

Tesco launched an internal investigation and placed a series of national newspaper ads apologising for the incident and explaining how it planned to change.

In response to the ruling Tesco said it accepted that not all those involved in the food industry had been implicated in the sale of products containing horsemeat. Rival supermarkets including Sainsbury's, Marks & Spencer and Waitrose were never found to have sourced food contaminated with horsemeat.

However Tesco said it had not operated in a vaccuum and the meat contamination problem it and others had encountered was due to systemic failings in the food supply chain. It submitted opinion and evidence from an expert to back that view, which the supermarket said was supported by the actions of the European commission and planned legislation on the supply chain which would apply to the whole European food industry.

A spokesman said: "We are disappointed with this decision, but accept that the ASA has taken a very literal view of the wording in the advert. We think our customers understood that our aim with the advert was to set out the action we had taken in relation to the horsemeat crisis and to acknowledge the fact the issue had serious consequences not just for Tesco, but for the whole of the food industry."

The ASA said the ad made the "definitive statement" that the crisis was "about the whole food industry" and concluded that consumers would understand that it referred to all food suppliers rather than Tesco alone. However it said the ad did not denigrate other companies because it did not name any particular supplier.

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Now supermarkets want you to live over their shops

Supermarket-built schemes may ease housing shortages, but will they actually be good places to live?

In Streatham, south London, builders are hard at work addressing the capital's dire housing shortage on a site next to the suburb's railway station. Their employer, however, is not a housebuilder such as Bovis or Barratt but Britain's biggest supermarket: Tesco.

Bustling about in hard hats and fluorescent jackets, they are putting the finishing touches to a 60,000 sq ft Tesco store and 250 apartments that sit above, behind and beside it. Living above the shop is very much back in fashion as supermarkets lead the development of thousands of homes in their latest tactic to secure new sites. As a consequence, the race for market share among the UK's largest retailers is inadvertently helping London chip away at a housing shortfall that equates to at least 32,000 new homes per year.

Tesco alone is building more than 800 homes in London in 2013, close to 5% of all the non-local authority homes being built in the capital. Its huge projects in Woolwich, Highams Green and Streatham are merely paving the way for a wave of supermarket-led home building projects which will flood across the south-east. More than 4,500 homes are being planned by the big five grocers in London alone over the coming years, according to property advisor CBRE, while construction market analyst Glenigan estimates supermarkets will be laying the foundations for more than 2,100 homes in 2014. Sainsbury's is likely to be responsible for the bulk of those, as it begins projects involving more than 1,500 homes next year. But Morrisons has planning permission for nearly 400 homes, while Asda is already involved in the building of 100 above its new store in Barking. Even Waitrose and Lidl are getting in on the act.

In the last couple of years, the big five seem to have woken up to the idea of developing homes alongside their retail portfolios, says Robert Davis, research director of Glenigan. He estimates that between them Tesco, Sainsbury's, Waitrose, Asda and Morrisons completed just 267 units in 2012, but that this will soar to more than 1,000 this year and double again next year. Some of these projects were first dreamt up nearly a decade ago but the complexity of gaining planning permission and assembling the sites mean that they are only now coming to fruition.

Helped by an upturn in the housing market, some enormous development projects are about to hit the street, such as Sainsbury's partnership with Barratt to redevelop the site of its supermarket in Nine Elms, in south London, involving nearly 700 homes, an 80,000 sq ft shop and a tube station. But supermarkets are also involved in small-scale urban developments, such as transforming moribund pubs into local convenience stores with a few flats above.

Most of these projects are in London, partly because that's where there is demand for the kind of flats easily built above a shop. Building over a busy supermarket is also relatively expensive, so such pricey apartments are more likely to find buyers in places like London where house prices are recovering rapidly.

But supermarkets have also been pushed into building in the capital because of planning guidance which encourages all new retail developments to include a residential element unless there is a very good reason not to do so. "There is a massive shortage of housing in London. Planners saw supermarkets wanted to grow and they are capitalising on that to force them to help solve the problem," says CBRE's John Witherell.

Local authorities outside London are also looking how they can capitalise on the trend. But Witherell believes these building schemes are more difficult to get off the ground outside the south-east because of lack of demand and the relatively high cost of such homes.Sainsbury's completed a development involving 100 homes in Leek, Staffordshire, this year and Tesco recently completed student accommodation block in Gateshead with nearly 1,000 bedrooms, but such projects, so far at least, have proved more rare.

Supermarkets are looking at a variety of solutions to make above-store building more cost effective, including putting pre-fabricated structures on top of existing shops, according to Witherell. Kathy MacEwen, head of programmes for Cabe, says: "There are many benefits to mixing supermarkets and housing. It makes more efficient use of land, while having residents supports activity and natural surveillance of streets, particularly when the store is closed."

Yet some concerns have been raised about the design and quality of the housing supermarkets are building, given the main purpose of the development is usually to open a new store.

Is it really wise to hand over the development of whole urban communities to the supermarkets? MacEwen says careful design is needed to avoid noise, smells and the sight of unattractive activities like waste storage and removal, deliveries and everyday operations.

But Witherell and Peter Sloane at property company Savills, who is leading sales at Tesco's Woolwich site, says the flats are selling well, which has boosted the prospects for more schemes. Tesco says it is in its interests to build quality homes which are popular with tenants.

"After building we remain the main tenant and occupier for years, so we have an added incentive to make sure these are developments of the highest quality. They need to last and be great places to live, work and shop," a spokesman says. With many more supermarket-backed homes appearing in the next few years, retailers will have to deliver the goods.

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Co-operative Bank reports £709m loss amid uncertainty over bad debts plan

Co-op boss says alternative to meeting regulatory requirements to cover £1.5bn shortfall is to put banking arm into administration

A thwarted attempt to become a major player in the banking industry earlier this year continued to haunt the Co-operative Group on Thursday as its bank reported a £709m loss and raised the prospect of a Northern Rock-style rescue if bondholders failed to back a £1.5bn restructuring bid.

The group, which has operations spanning funeral services to supermarkets, said there would be no quick fixes as directors conceded that shoring up the bank, which has 4.7 million customers, would involve job losses and significant restructuring of the wider group.

Richard Pym, the bank chairman, said that without new capital the banking unit "will not be a going concern".

The Co-op group's new chief executive, Euan Sutherland, said there was no plan B. The only alternative to meeting regulatory requirements to fill a £1.5bn shortfall in the bank's reserves would be a government takeover similar to the bailout of Northern Rock in 2008. Sutherland reported that losses at the bank of £709m sent the wider group into a £559m loss, compared with £18m of profits in the first half of 2012.

He blamed £496m of previously undiscovered bad debts and a £150m write-off on IT systems for the deterioration in the bank's financial situation. "It's inevitable in a restructuring of this size that there will be some jobs at risk," he said, predicting that the bank would be diminished from its current scale of 10,000 staff and 320 branches.

Sutherland said a new management team would devise a turnaround strategy with the management consultancy Oliver Wyman. Sutherland indicated that executives would receive bonuses next year despite the group's travails, saying that a remuneration plan will be announced in March that will reflect the need to retain experienced senior staff.

The Co-op's plunge into loss follows a difficult year that started with an audacious bid by its bank to buy 632 branches from Lloyds Banking Group and ended with the banking regulator insisting it abandon the deal and find £1.5bn to cover previously undisclosed bad loans.

The debacle stems from the Co-op bank's purchase of the Britannia building society in 2009, which had joined several other banks in making indiscriminate loans to corporate customers, many involved in overvalued commercial property deals.

Sutherland said the Co-op bank's bad loans were mostly accounted for by Britannia, with half of all its poorly performing retail loans and three quarters of its roughly £440m corporate bad debts blamed on over-zealous loan agreements sold by the building society.

The Prudential Regulation Authority (PRA), the City regulator, said on Thursday that the scale of the losses did not alter its demand that the Co-op plug the £1.5bn hole in its balance sheet.

A rescue of the bank has the support of the Co-op's board, which is made up of 20 non-executive directors, 15 of whom are elected from regional boards and five from Independent Co-operative Societies. Sutherland said the board had considered all the options and agreed to commit £1bn of the Co-op group's funds to cover bad debts in return for a debt for equity swap by bondholders.

Bondholders ranging from pensioners to hedge funds will have to take a loss on their investment under plans for a "bail-in" in coming months.

They will be forced to contribute £500m through an "exchange offer", which will result in a stock market listing for the bank. Some 15,000 holders of Co-operative Bank bonds have written to the Bank of England's financial policy committee seeking an intervention in rescue of the bank.

Mark Taber, representing retail bondholders who believe they should be spared a haircut on their investments, said there was a "disgraceful" lack of detail in the Co-op's offer. He said: "The PRA should not allow this and should make a direction to the Co-op Bank [to alter the restructuring] accordingly."

While the Co-op's board has agreed the deal, there is likely to be much debate inside Britain's largest mutual organisation about the cost of the rescue, the prospect of running a business with a large number of shares owned by non-mutual institutions and the potential for another banking crash to wreck the wider Co-operative Group.

Sutherland, who replaced Peter Marks in May, said: "We are sorry but we are a new team and grasping the nettle and getting on with fixing the situation."

If a rescue fails

Should the Co-op fail to secure a rescue of its banking division it will fall to the government to step in.

There are several options for ministers and which one they choose will depend on the state of the Manchester-based bank.

A Northern Rock-style takeover would be the most draconian. The government purchased all the Rock's shares and made it a wholly-owned state enterprise.

A bailout of the bank would involve a large injection of cash to cover bad loans in return for partial ownership. The state owns 83% of Royal Bank of Scotland and 39% of Lloyds. In the case of Lloyds, following a £20.6bn injection of funds.

Another option was pursued in the case of Dunfermline building society, which like the Britannia building society began offering loans on risky property deals at the height of the housing boom.

Dunfermline, which was unable to raise extra funds from its members to cover bad debts, was absorbed into the Bank of England on a Friday and transferred on the following Monday to the Nationwide.

In each case the first £100,000 of individual savings are protected.

New tougher rules agreed in Brussels are due to take effect later this year, though no date has yet been set. The Recovery and Resolution Directive will force investors that lend to banks to sacrifice some of their assets as part of any rescue plan. It will also force banks to offload profitable divisions to cover losses under a so-called "living will".

The Co-op has in effect adopted the strategy put forward in the directive before it has become law, telling bondholders to sacrifice around a third of their holdings to pay a third of the £1.5bn bailout package. The Co-op group will also sell its insurance arm.

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Ocado 'well positioned to benefit from online growth' despite another loss

Online grocer hails growth in customer numbers and average spend as it announces pre-tax loss of £3.8m

The online grocer Ocado has insisted it is making progress despite remaining in the red in the first half of the year.

The retailer said growth in customer numbers and average basket values, as well as its 25-year deal with the supermarket chain Morrisons, were signs that it was well-placed to benefit from the growth in the online grocery market.

It made a pre-tax loss of £3.8m in the 24 weeks to 19 May, however, which was bigger than analysts were expecting and compared with a £0.2m pre-tax profit in the same period last year.

Ocado said the loss was driven by advisory costs associated with the Morrisons deal, which is subject to shareholder approval, as well as pre-opening costs of new distribution centres.

Ocado has yet to report an annual pre-tax profitRevenue rose 15.6% to £355.9m, while customer numbers increased to 360,000 from 337,000 at the end of the first half last year. Average spend rose to £114.90 from £113.10.

Tim Steiner, the chief executive, said Ocado was gaining market share. He said: "We believe we remain well positioned to benefit from this continuing growth in online demand with increased optionality and flexibility in how we drive growth and profitability in our business in the future."

He added that the company, which includes Waitrose products in its range, was focused on delivering the agreement with Morrisons, rather than "making a quick announcement about another transaction".

"While we believe that the economic and consumer environment remains challenging, we continue to see that consumers are increasingly looking to shop online for groceries, evidenced by the online growth figures reported across the grocery industry. We expect to continue growing broadly in line with the market," Steiner said.

Ocado appointed Sir Stuart Rose as chairman in May.

Analysts at Exane BNP Paribas said Ocado still had a lot of work to do: "Having signed its first partner, Ocado has made a sizeable step towards being a profitable business but the group still has plenty left to do, not least show its latest technology can work as the group expects and that it can get Morrisons online relatively painlessly."

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Supermarkets face fine of percentage of turnover for mistreating suppliers

Christine Tacon, the new groceries code adjudicator, will be able to arbitrate on contract disputes and investigate complaints

The UK's new supermarket watchdog wants to fine retailers a percentage of their turnover if they mistreat suppliers.

Christine Tacon, the groceries code adjudicator who started work on Tuesday, is able to impose fines and force supermarkets to apologise publicly with ads in national newspapers if they do not treat suppliers fairly. She is in charge of overseeing a legally binding code of practice, put in place more than three years ago, for supermarkets with a turnover of more than £1bn, such as Tesco, Sainsbury's and Asda.

The code does not govern the prices retailers agree with their suppliers, but aims to prevent changes part-way through the contracts. It covers groceries including food, drink and toiletries, but does not include clothing or tobacco.

Christine Tacon, new groceries code adjudicator, will oversee a code of practice governing relations between supermarkets and suppliersSpeaking on her first day in office, Tacon said her first job is to recommend the rules under which investigations would occur and the maximum fines that could be imposed.

Those recommendations are expected to be published in the next few weeks and will then undergo a 12-week consultation. The new system must be in place before Christmas Day, before which MPs will have to approve the maximum fine.

Tacon said she was inclined to base fines on supermarkets' turnover as this was a straightforward approach similar to that used by the Office of Fair Trading. She said: "Fines are there as the ultimate deterrent. I am prepared to use my powers but I hope we don't have to get to that stage."

She has spent several months talking to suppliers ahead of her official appointment this week but will only be able to look into complaints about breaches of the code that occur from her first day in office. She will be able to arbitrate on disputes and investigate complaints made anonymously or by third parties such as the National Farmers' Union.

She will be looking at issues such as supermarkets charging up to £1m to display suppliers' products, or the imposition of fines for customer complaints that have nothing to do with quality of the goods supplied. Tacon argues that such ruses add extra costs to the industry, forcing up prices for shoppers.

Article Source : http://www.guardian.co.uk

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