Assessment Task 3 - CASE STUDY Coles/Wesfarmers For many years the Australian gr

Question

Assessment Task 3 - CASE STUDY Coles/Wesfarmers

For many years the Australian grocery sector has been dominated by two major players Coles and Woolworths (Safeway). Over the last decade or so both companies have been subject to scrutiny with regard to supplier management and there have been many negative claims made. There are a large number of newspaper and journal articles related to the way the company engages and works with its suppliers. In 2011, the ACCC brought charges against Coles for unconscionable conduct in dealing with suppliers and was found negligent. In response, the company appointed the former Victorian Premier Mr. Jeff Kennett as an independent arbiter to engage with suppliers and oversee disputes. Currently Wesfarmers (Coles) has 15,000 suppliers. For this research project, you will need to conduct an extensive search online. There are many newspaper and journal articles freely available online and you can also access the company website as well as many of their supplier websites.

1. On its company website, Coles states ‘We commit to strong and respectful relationships with our suppliers’. From your research, what sort of relationship does the company have with its suppliers and where does the power lie?

2. What is the voluntary Food and Grocery Code of Conduct?

a. What is its purpose?

b. When was it developed and by whom?  

Explanation / Answer

1. Coles is trying to be more customer centric and make it easier for suppliers to work with them. Coles has introduced a Coles supplier charter to give clearer expectations to merchandise suppliers. It is aligned to the Grocery code of conduct stating their supplier policies and concern redressal process. Coles has been fined in the past for being threatening and too aggressive with its suppliers.

Coles also has a 'always open survey' allowing suppliers to give an anonymous feedback about Coles. Overzealousness by some category managers at Coles led them to ask suppliers to agree to newer prices or remove their products.

Although Coles has tried to be a more supplier friendly retailer, the power mainly lies with Coles while dealing with its suppliers. This will always be the case because they buy from their suppliers and are 'customers' to their suppliers.

2. Australian Competition and Consumer Commission (ACCC) regulates the Food and Grocery Code of Conduct.  

It is a voluntary code and applies only to those retailers and wholesalers who agree to abide by it. It helps govern the conduct by grocery retailers and wholesalers in their dealings with the suppliers. The code has certain guidelines like the retailer and wholesalers should enter into a written grocery supply agreement, they must act in good faith and retailers must meet a set of minimum behavioural standard.

a. It ensures that the relationship between supplies and retailers / wholesalers is built on good faith. The majority of the obligations fall over the retailer as it provides more certainty, clarity and fairness to suppliers in their dealings with retailers. There are no financial penalties for breach of code but court injunctions or compensation can be sought for losses, if any.

b. In March, 2015, the federal government formally introduced the Food and Grocery Code of conduct, after years of consultation with food retailers and Australian Food and Grocery council. By July, 2015, the major retailers including Coles and Woolworths had signed up for the code.

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