Woolworths to investigate unauthorised deductions from supplier payments

Supermarket giant Woolworths has pledged to investigate unauthorised deductions from supplier payments after it was revealed to be an industry-wide ­problem.

Woolworths will investigate unauthorised deductions from supplier payments after the in­dependent supermarket reviewer revealed an industry-wide ­problem.

The nation’s $145bn food and grocery manufacturing sectors have raised the issue of unauthorised deductions from their invoices by all major supermarket chains, including Coles and Aldi, and are pushing the independent reviewer, appointed by the federal government, to take up the problem directly with CEOs and rectify the problem.

Woolworths chief executive Brad Banducci told The Australian the retailer “needed to get to the bottom” of unauthorised deductions and declared: “We will fix it”.

He said it wasn’t Woolworths’ policy to take out fees that didn’t meet established policy or were taken without written supplier consent.

“In food we have 3800 suppliers, and there’s always things we can improve,” Mr Banducci said.

“One of the big issues for us, and we haven’t done as good a job as we want to, is that we have some massive supply partners, multibillion-dollar companies that are bigger than us in market cap, and then we have some really small ‘mom and pop’ start-ups – and we just treat them all the same. We have got to be much better at managing small suppliers differently to large suppliers.”

Woolworths has also pledged to improve the supplier portal its trade partners use when dealing with the company, provide more sales data to smaller suppliers. It is working on speeding up payment terms so smaller suppliers are paid within 14 days. Woolworths managing director of supermarkets, Natalie Davis, will monitor the status of commercial relationships with any supplier who has made a complaint relating to the Food and Grocery Code of ­Conduct.

The code is a voluntary agreement under the Competition and Consumer Act that governs the relationship between supermarkets and suppliers. The signatories – Woolworths, Coles, Aldi and wholesaler Metcash – are subject to compliance and enforcement action by the ACCC.

The independent reviewer of the Food and Grocery Code of Conduct, Chris Leptos, recently presented he nation’s supermarket bosses with anonymous supplier complaints.

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

Unauthorised deductions from supplier payments is a big issue for all the signatories of the Food and Grocery Code of Conduct. Picture: NCA NewsWire / David Mariuz

The complaints included a number of issues but particularly payment terms – a bugbear for smaller suppliers that rely on quick payments to maintain cashflows and remain solvent.

Mr Leptos, a former managing partner of EY and senior partner with KPMG, was appointed independent reviewer by the Morrison government.

His role was renewed by the Albanese government.

A recent annual report set out Mr Leptos’s key findings from the 2022 survey of signatories and grocery suppliers.

Mr Leptos said unauthorised deductions from supplier payments was a big issue for all the signatories of the code.

“In the annual survey that (unauthorised deductions) was a common theme … 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.”

He recently met new Coles boss Leah Weckert to raise similar concerns.

After meeting Mr Banducci he asked him to put in writing the supermarket’s plan to improve its supplier relationships. In a letter to Mr Leptos, Mr Banducci sets out Woolworths’ proposals to better deal with suppliers and unauthorised deductions.

“We are considering further the feedback in relation to unauthorised deductions, provided by 7 per cent of trade partner respondents in the Independent Reviewer Report,” Mr Banducci said in his letter.

“Our internal systems prohibit deductions/set-offs being made against invoices without trade partners’ written consent. Further, where an error does occur, our practice is to repay the relevant amount to the trade partner without delay.”

Mr Banducci confirmed to The Australian the retailer would investigate how and why the unauthorised deductions took place.

“We need to get to the bottom of it. It is not our policy and there is no benefit in it,” he said. “We will fix it. We will own it.”

Mr Banducci also told Mr Leptos in a letter dated July 20 that the supermarket had made a number of key changes based on supplier feedback to enhance confidence and integrity in retailer/trade relationships.

This included improving the experience of suppliers, especially smaller suppliers, who dealt with Woolworths through its portal.

“We have improved the functionality and ease of using the portal and we have a pipeline of further improvements over the next 12-18 months,” he said.

Woolworths had also decided to provide more data to smaller suppliers to help them make better business decisions.

“We know how important it is for small suppliers to be paid on time. Over the past two years, we’ve boosted on-time payments to small business trade partners to 97.2 per cent,” Mr Banducci said.