Supermarket code reviewer calls out Aldi, Coles, Metcash over unauthorised supplier deductions

The supermarket code of conduct reviewer has called out Aldi, Coles and Metcash for not having a ‘credible plan’ to stamp out unauthorised deductions from supplier payments.

The powerful independent reviewer who oversees the treatment of food and grocery suppliers by the nation’s largest supermarkets has hit out at Coles, Aldi and wholesaler Metcash for failing to offer a “credible plan” for stamping out unauthorised deductions of money owed to suppliers.

Chris Leptos, who was appointed to the role by the Morrison government and renewed by the Albanese government, congratulated Woolworths in a LinkedIn post on Monday for sending him a plan to address unauthorised deductions, saying it was the only supermarket with a “credible plan to fix this ­problem”.

Mr Leptos told The Australian last week that unauthorised deductions from supplier invoices was an industry-wide problem and that he had raised the issue with Woolworths chief executive Brad Banducci, Coles boss Leah Weckert, Aldi senior executive Oliver Bongardt and Metcash food division boss Grant Ramage.

He said only Woolworths chief executive Mr Banducci had come back with a written plan to fix the problem.

“I discussed the issue with all of them (supermarkets) and Woolworths came back and said we will give you a plan. I said put it in writing. They did.

“None of the others have done that,” Mr Leptos told The Australian on Monday.

“And so I think that speaks volumes, doesn’t it, that there is one organisation (Woolworths) that I would describe as the pace setter.”

Woolworths, Coles, Aldi and Metcash – the wholesaler whose retail banners include IGA – are signatories to the Food and Grocery Code of Conduct, which Mr Leptos helps to oversee.

The latest annual report from Mr Leptos, which draws on discussions and surveys with the nation’s $145bn food and grocery sector, shows unauthorised deductions of money owed to suppliers has become a major source of frustration for suppliers.

According to the report, about 7 per cent of supplier complaints about Woolworths were related to unauthorised deductions, the highest of the four supermarket groups. For Metcash just under 5.5 per cent of complaints cited unauthorised deductions, for Aldi it was 3.5 per cent and Coles – the lowest – just over 3 per cent.

Unauthorised deductions by supermarkets from money they owe food and grocery suppliers has emerged as a major industry-wide problem. Picture: AFP

Mr Leptos said on Monday he had shown Mr Banducci’s plan to each of the other supermarket ­executives.

“I said to them, here is the letter from Woolworths – top that. The phrase I would use, which is what assistant federal Treasury Minister Andrew Leigh has used, is that he wants to see a race to the top – and Woolworths is in the race.”

It is believed that Mr Leptos only spoke with Ms Weckert two weeks ago and that Coles is still assessing feedback from suppliers and its own plan.

A spokesman for Coles said: “We are committed to positive ongoing relationships with our suppliers and are considering the feedback from our recent meeting.

“Good supplier management practices are fundamental to the success of our business and we will always work hard to continue to improve and strengthen our supplier engagement.”

The Coles spokesman said the chain prohibited deductions outside agreed terms.

“We have undertaken significant work over the past few years to simplify agreements and further improve our accounts processes. Coles encourages any supplier with concerns about invoicing to raise them directly with us for resolution,” he said.

A spokesman for Metcash said: “Any supplier deductions we make are made in line with the Food and Grocery Code of Conduct. We have recently made ­improvements to how we communicate with suppliers through our new supplier payments portal, Payments Plus, which provides more visibility on when and why deductions are made. We will continue to evolve this based on supplier feedback. We regularly solicit feedback from our suppliers, directly and through various industry surveys, and use this to continue to build on our positive supplier relationships.”

Mr Banducci said Woolworths “needed to get to the bottom” of its unauthorised deductions. “In food we have 3800 suppliers and there’s always things we can improve,” he said.

The Food and Grocery Code of Conduct is a voluntary agreement under the Competition and Consumer Act that governs the relationship between supermarkets and suppliers. Its signatories – Woolworths, Coles, Aldi and Metcash – are subject to compliance and enforcement action by the Australian Competition & Consumer Commission.

As part of changes to strengthen the code in 2020, the Independent Reviewer oversees dispute resolution between suppliers and major retailers or wholesalers. These complaints are typically de-identified as some suppliers fear retribution.

The complaints, which Mr Leptos collects from suppliers, largely concern payment terms, which is a bugbear for smaller suppliers that rely on quick payments to maintain healthy cashflows and remain solvent.

Mr Leptos, a former EY managing partner, government, and senior partner with KPMG, said unauthorised deductions from supplier payments was a hot issue not just for Woolworths but also for the other signatories of the code.

“In the annual survey (unauthorised deductions were) a common theme across all four of those code signatories, so Woolworths is not a standout by any means, and it is an industry-wide concern. But I’m very happy with the way Woolworths are addressing it,” Mr Leptos said.

“There is a clear plan from Woolworths to get on top of that issue,” Mr Leptos added.