Small suppliers want bigger slice
RETAILERS SHOULD USE SMALL SUPPLIERS Bid to force big four grocery retailers to source more from small producers.
The big four grocery retailers – Shoprite, Pick n Pay, Spar and Massmart – should be compelled to source products they sell from small producers in order to curb anticompetitive behaviour in SA’s retail industry, it was recommended to the Competition Commission.
The commission’s grocery retail market inquiry heard fresh complaints last week from KwaZulu-Natal-based emerging suppliers on how the dominance of SA’s big four grocery retailers leaves little room for them to grow.
Despite the four big retailers having enterprise and supplier development initiatives, they’ve been accused by small players of not stocking their products.
The supplier development initiatives of big retailers are intended to support small businesses by procuring goods and providing them with access to their retail shelves. Retailers typically favour large producers who can guarantee volumes and quality of goods.
Among the retailers accused of not integrating emerging producers into their supply chain network is Massmart, the operator of Game and Makro, among others.
Thabo Gininda, owner of Ingola Trading, which manufactures soup and spices, accused Massmart of not stocking his products after being part of the retailer’s supplier development course in 2015. He told the inquiry that upon completing the course, he expected Masscash to stock his soup and spice products. Masscash is a division of Massmart with brands including Jumbo Cash and Carry, Saverite Supermarkets and others.
Gininda claimed that after he completed the course, discussions with Massmart began about supplying the retailer with his products. The products, he told the inquiry, were later subjected to health and nutrition tests.
“After the tests, the products were given a certificate so that they could be sold to the public.”
However, Massmart said his products didn’t meet the retailer’s supply development programme requirements, including having a formal product line and owning a production facility to manufacture his products.
Gininda confirmed the latter at the inquiry, saying he uses a third party for manufacture.
“We did attempt to assist Mr Gininda with training by enrolling him in a small business management programme. However, no commitment was made to list products from entrepreneurs enrolled in the course [in Massmart’s stores],” said Massmart spokesperson, Annaleigh Vallie.
Sanjay Lutchman, a bottled water manufacturer, said big retailers ask hefty payments before putting products of smaller producers on shelves, which hinders their ability to compete. He added when retailers eventually stock their goods, smaller producers usually have to pay a “kickback”.
“Big retailers ... want to see the number of sales and want me to reward them for stocking my products. They don’t want to hear about our costs, they just want their kickbacks, which is 5% to 10% of our profits.”
Director of Spar Wayne Hook said the group sourced only 20% or R15 billion worth of its goods annually from local suppliers as most suppliers did not have capacity to supply the group.