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Tesco CEO to suppliers: "We're sorry"

26 January 2016

Tesco has issued an apology after the supermarkets watchdog released a report criticising the retailer’s treatment of suppliers. 

The Groceries Code Adjudicator conducted a two year investigation, finding that Tesco was in breach of the legally-binding groceries code by delaying payment to suppliers.

Dave Lewis, the Tesco CEO, admitted the company was apologising for a second time over the fiasco. 

“In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers,” he said. 

“We shared these practices with the Adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry.

“I am grateful to the Adjudicator for the professional manner in which the investigation has been conducted. We accept the report’s findings, which are consistent with our own investigation. 

“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed.

“In January 2015, we made material changes to our business that addressed the majority of the historic practices referred to in the report. We have changed the way we work by reorganising, refocusing and retraining our teams and we will continue to work in a way which is consistent with the recommendations.”

Tesco claims it has introduced 14 initiatives to improve the way it works with its 3,000 suppliers. 

Christine Tacon said that the investigation, which was launched in 2013, has already yielded results.

“I am pleased that many suppliers have reported improvements in their relationship with Tesco to me since the period under investigation,” she said. 

“Tesco has also kept me informed of changes it is making to deal with the issues. This is a demonstration of the impact my role is making. I believe that my recommendations will lead to significant improvements at Tesco and in the sector. ”

During the investigation she found delays in payments arising from data input errors, duplicate invoicing, deductions to maintain Tesco margin; and unilateral deductions resulting from forensic auditing, short deliveries and service level charges.

Ms Tacon said: “The sums were often significant and the length of time taken to repay them was too long.

“For example one supplier was owed a multi-million pound sum as a result of price changes being incorrectly applied to Tesco systems over a long period. This was eventually paid back by Tesco more than two years after the incorrect charging had begun.”

The Adjudicator also investigated whether Tesco had required suppliers to make payments to secure better shelf positioning or an increased allocation of shelf space in breach of the Code. She found no evidence of this.

However, she was concerned to find practices that could amount to an indirect requirement for better positioning. These practices included large suppliers negotiating better positioning and increased shelf space in response to requests for investment from Tesco, as well as paying for category captaincy and to participate in Tesco range reviews.

She said: “I am concerned that as a result of these practices the purpose of the Code may be circumvented to the detriment of smaller suppliers who cannot compete with payments for better positioning, category captaincy or to participate in range reviews.

“I have decided to launch a formal consultation with the sector, involving both retailers and suppliers, to help me reach a firm conclusion on whether these practices are acceptable.”


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