In light of Tesco’s pledge to reduce wastage, Alex Pyatt considers the contract implications for those who supply perishable goods to supermarkets.
Tesco’s pledge to reduce food wastage, which may now be echoed by other players in the market will have various implications for suppliers of perishable products – many of whom will already feel under contractual pressure to perform.
Things you may need to consider:
Expect obligations in relation to the physical packaging of the products to change - this might mean smaller packs or using innovative methods to further reduce transit damage and extend shelf life. It may also mean applying packaging to products which were previously only supplied loose. This will have production cost implications.
Expect labelling requirements to change. For example, the specification may no longer require "display until" wording.
Expect the volume of each order to reduce. You may also expect overall volume throughout the year to reduce.
Expect the customers to seek renegotiation of their volume discounts.
Expect forecasts which the customers provide to cover a shorter period.
Beware of any obligation in the contract which may require you to maintain sufficient stocks if the clauses dealing with forecasting or lead times are changed.
If you supply on a long term contract, expect the customer to seek to vary the terms. It is important that the implications for the contract as a whole are taken account of when individual clauses are amended. It is also important that any variation of an existing agreement is properly documented.
For more information as to how Thrings can help with your commercial contracts, please contact Alex Pyatt. If you work in the agriculture and food sector, click here to find out more about our specialist sector team.