The briefing on the Scottish dairy industry and milk prices was penned by the Scottish Parliament’s Rural Affairs, Climate Change and Environment (RACCE) Committee.
The committee, which has been investigating the plight of the Scottish dairy sector for several weeks, said it had been “horrified” by the allegations of dairy supplier abuse Tacon was fielding.
The committee said the GCA had relayed anecdotal evidence suggesting cases of supermarkets in Scotland were charging for the right to tender, or for premium shelf-space. Poor prices were also being paid in some cases for non-liquid milk dairy products, it heard.
Charging for shelf space
As a result, it was encouraged that Tacon had launched an investigation into allegations of Tesco charging for shelf space, which would include dairy products.
She had stressed that she did not have a remit to probe milk pricing, and that she could not investigate cases concerning indirect suppliers.
However, she had outlined other issues that she had been working on with supermarkets, said the RACCE committee. These included what she had referred to as “drop and drive”. This practice involved suppliers delivering milk to a retailer, but receiving no proof of delivery and then the retailer claiming that the total amount was not delivered and reducing payment accordingly.
According to the bulletin, other allegations made to Tacon had included:
- demand for lump sums from suppliers to fill gaps in accounts
- supermarkets penalising suppliers for failing to sell unrealistically large deliveries resulting from their poor demand forecasting
- retailers stipulating who suppliers should use for artwork and photography and then overcharging them
- supermarkets passing inflated customer complaint costs on to suppliers
“We were, quite frankly, horrified at this list of practices which the adjudicator must have good reasons to investigate,” the committee said.
“It should be noted that all of the supermarkets which gave evidence to us, with the exception of Tesco who declined to comment due to the ongoing investigation, said that they did not recognise the reprehensible practices outlined by the adjudicator.”
Its briefing urged all dairy suppliers with evidence that retailers had breached the Groceries Supply Code of Practice should contact the GCA immediately, under the assurance of anonymity.
The committee expressed disappointment that some of the major supermarkets had to be cajoled into appearing before it, although others had appeared straight away.
Turning to dairy cooperative First Milk, which announced in January because of cash flow problems that it would have to pay milk suppliers late, while requesting increased investment from them, the bulletin stated: “We obtained information during our inquiry which clearly showed that farmers contracted to First Milk are more often than not, and over a sustained period, receiving the lowest price for their milk when compared to other processors or direct purchasers.”
Improvement in management
At the same time, it said First Milk was the only choice of customer for some suppliers in remote locations. It called for several measures to address the First Milk situation, including investment in its Campbeltown creamery and Cowdenbeath facilities, improvement in its management and collaboration with other producers.
The committee also called for more transparency in milk pricing throughout the supply chain. It called for initiatives to increase Scotland’s dairy processing capabilities. It also said the milk price floor beyond which EU intervention to support producers kicked in should be raised to help the industry cope with plummeting prices sparked by a milk glut.
The letter claimed more could be done to promote Scottish dairy brands and called on Lochhead to communicate progress on the launch of a Scottish dairy brand, announced earlier this month.