Moving Forward

Opinion from Ernie Newman on developing relationships in the grocery industry

Reconciliation!

That’s what seems to be needed. Reconciliation among the various parties, organisations and people who have emerged from opposing corners of the bruising campaign to deal with market failure in the grocery sector.

It came home to me when I read through Foodstuffs North Island’s new “Market Study Reporting Dashboard.” It’s a constructive response to the Study – a proactive programme to deal with issues such as clearer pricing, simpler promotions, removal of land covenants, wholesale supply to non-members of the co-op, and an “independent” measure of price movements and their causes. 

The especially interesting part was that on improving relationships with suppliers. There will be a fortnightly Supplier Forum with 350 attendees, a “Foodies Connect” conference with suppliers in person every six months, a supplier working group, supplier guide, and supplier survey.

So far so good. But the glaring gap was any mention of interaction with the suppliers’ own organisation, the Food and Grocery Council. 

Forums, working groups and conferences are all good stuff. They add to understanding and build relationships. But they are not places where the really grunty issues can be addressed in a  robust way. There will always be a need for suppliers to meet together as a distinct group, identify the issues, and then send delegates to talk with distributors as representatives of the wider supplier community. 

That’s where the FGC has always had a key role. Way back when I was involved in its predecessor, the Grocery Manufacturers Association, there was regular, robust interaction. There was common ground in many areas – a proposed packaging tax, bar coding, and government food standards were examples. And there was disagreement in many too – central distribution, promotional practices, house branding and import duties. 

But the right of the GMA to speak out for the positions of its members was never challenged. There was mutual respect for the opposing views.

So its worrying that the FGC doesn’t rate a mention in the “relationships with suppliers” part of Foodstuffs’ Dashboard.

Nobody should be surprised that there has been damage to relationships during the Market Study process. The FGC did what it had to do – the result proves that beyond doubt. It’s a pity the role of whistle-blower ended up with the supplier organisation – with hindsight a number of government agencies and consumer bodies should be feeling uncomfortable that they failed to highlight the issue of market failure and act a decade earlier. 

But the FGC picked up the challenge. It did the job admirably, to the eternal benefit of its several hundred supplier members as well as the Team of Five Million.

Now is the time for the FGC, and the distributors, to rebuild bridges. Relationships, commercial and personal, have been damaged during the battle. These need to be repaired in a mature way. Maybe some independent facilitation could help?

There is much to be done jointly. For example, the industry is a target of public alarm about inflation. Woolworths’ Spencer Sonn recently published a thoughtful and constructive article defending some of the misconceptions. But this is a topic where supplier and retailer leaders could usefully collaborate at a high level to send common messages that aid public understanding. 

The last time inflation got this much out of control it resulted in the Muldoon price freeze – a totally misconceived disaster implemented by people with zero understanding of the dynamics of commerce. Absolutely nobody who went through that would want to repeat it! But its not inconceivable that something similar could be proposed today as the political heat intensifies. If you don’t believe me ponder this -  the last one was the brainchild of a National government!

That’s but one of the issues in which a common understanding and good sector relationships are needed in this very crucial industry which lives, increasingly, in a glasshouse.

The notion that the sole role of a business is to maximise the short-term returns to shareholders has long passed. Everyone is part of an economic and social ecosystem. Supermarkets could reasonably view themselves as an intermediary between two stakeholder groups – the consumers to whom they provide a range of goods presented in a convenient way, and suppliers to whom they provide a cost-effective distribution service. Viewed like that, the need for collaboration and communication across all levels becomes even more compelling.

So I hope all parties will consider picking up the phone to one another. Or maybe someone independent might take an initiative by bringing them together. We’re a tiny country with a history of working together well. 

Lets move on and get talking.

Ernie Newman is a Waikato-based consultant who worked as an advocate in both the telecommunications industry in the 2000s when he was at the heart of the campaign for more competition, and the grocery industry in the 1980s. He advises many clients, including the Food and Grocery Council. The views in this article are entirely his own.