Tesco finance teams 'need educating' over supplier treatment

TESCO’s FINANCE TEAMS must be trained on the damning findings into the grocer’s treatment of suppliers by the Groceries Code Adjudicator.

The adjudicator Christine Tacon, who serves as grocery’s governance watchdog, set out a raft of concerns over Tesco’s management of suppliers. This evidence included:

• Tesco deducting or deferring payment of money owed to suppliers while in disagreement or for other services;
• Unacceptable levels of errors that resulted in underpayments, which then took an “unreasonable amount of time” to be repaid;
• Tesco making unilateral deductions from supplier accounts for promotional feature space, even when not agreed;
• Duplicate invoicing by Tesco for promotional activity, both of which would be deducted from supplier accounts;
• Tesco buyers holding off payments, or attempting to reduce payments, based on questionably-managed margin targets; and
• Payments delayed to shift them into the next financial period.

Tacon said: “The length of the delays, their widespread nature and the range of Tesco’s unreasonable practices and behaviours towards suppliers concerned me. I was also troubled to see Tesco at times prioritising its own finances over treating suppliers fairly.

“My recommendations will deal with the weaknesses in Tesco’s practices during the period under investigation.”

Tacon’s report found several extreme examples of supplier treatment. A multi-million pound sum was owed to a supplier as a result of incorrect pricing. It was paid back by Tesco more than two years after the incorrect charging had begun. In another example, millions of pounds were owed to a supplier after Tesco invoiced them for products it did not supply.

The report also flagged up that some improvements have been made in Tesco’s relationships with suppliers.

Tacon launched the investigation after Deloitte had undertaken a review of Tesco’s position on behalf of the grocer. The Deloitte review quickly followed Tesco’s revelation that it had a £263m profit overstatement.

Kingfisher’s Bruce Marsh joined Tesco as UK FD in May 2015, following the departure of Carl Rogberg.

Former BP finance chief Byron Grote joined Tesco as a non-executive two months’ earlier than Marsh.

Read the full adjudicator’s report here