The grocery industry is increasingly politicized
Power struggle between chains and suppliers is no new phenomenon, but it's growing. Therefore, the business is more politicized throughout the EU than just a few years back. In Denmark, the retailers fight all they can against new EU rules that, according to their view, threatens the free right of negotiation between seller and buyer.
Once a year, the supermarket chains in Denmark meet with their suppliers to plan the year's trade - including prices, volumes, campaigns and marketing.
The annual negotiations take place right now, not only in Denmark, but in Norway, Sweden and Finland, and indeed throughout Europe.
Consumers and retailer say no to more regulations
According to the EU it is time to decide on a better and more efficient framework for negotiations and agreements between retailers and suppliers. Therefore, EU is now proposing a directive with a total of 50 rules, covering a wide range of issues; payment, prices, quality of the goods, marketing and campaigns, to mention a few.
Chief economist in Forbrugerrådet Tænk, Martin Salamon, calls the proposal totally wacky.
As it seems now, it may end up in increased consumer prices; and consumers will have fewer opportunities to demand animal welfare, ecological products or whatever changing consumer habits necessitates in the future – short and long term.
The EU deprives the industry the opportunity to negotiate as independent parties
The EU proposal has received very negative reception both from the European consumer organization “The Consumer Voice in Europe” and European grocery trade in general. Both Danish Coop and Salling Group are co-signatories in clear no to EU.
"The EU proposed directive is a mockery on contractual freedom between partners, and the proposal has evolved into the EU when the EU is worst," says Jens Visholm, Executive Vice President in Danish Coop, in an official statement.
Suppliers say yes to EU directive
The annual negotiations between chains and suppliers are closed, but it has often been heard that some suppliers have felt pressured. And the brand suppliers, MLDK, also support the directive.
"You always have the opportunity to say unfair trading practices, but the consequences can be absolutely fatal, no matter if you are big or small," says Niels Jensen, director of MLDK.
The starting point for the new rules was in the beginning in order to protect the smallest suppliers. But among those who will get protection from the directive now is first and foremost giant players like Nestlé, Mondelez, Danone and other big, big players.
From Dansk Erhverv, it seems that parts of the directive may be in violation of the Competition Act.
"I find it difficult to see that large multinational groups such as Nestlé, Unilever, Mondelez and Danone may need protection from Danish grocery stores," says marketing manager of Dansk Erhverv, Lotte Engbæk Larsen, who use words like "totally crazy" about the proposal, as it looks right now.
Sources: Dansk Handelsblad, Reuters, Coop, Salling, Bloomberg. Retail News, Forbrukerådet Tænk, MLDK, Dansk Erhverv.
Interpretations
Forbrugerrådet Tænk
- A Danish independent consumer organization that works to promote sustainable and socially responsible consumption and well-functioning markets for the purpose of safeguarding consumer rights and making consumers a power factor in the market.
MLDK
- Corresponds to Branded Manufactures Association, which we know from most mature markets, not least in Norway and Sweden. The association first and foremost safeguard the interests of the branded goods suppliers, i.e. Nestlé, Danone and others.
Dansk Erhverv
- A business organization and employer association for a wide range of businesses. It is the Dansk Erhverv’s vision to be the most important political representative and preferred advisor for business in Denmark.