“Why do retail chains transfer responsibility for damaged products to manufacturers and what practice exists in the EU?”, — write: epravda.com.ua
The long-term conflict between Ukrainian retail chains and domestic food producers not only blocks the movement of our country to the family of European countries with consolidated legislation, but also destroys the entire food production business ecosystem and undermines the foundations of food security and economic stability countries Let me remind you that the essence of the matter is that food market participants have long ceased to be in the win-win model, when each of them receives additional profits and maximizes the results of their work. In fact, we, as representatives of the Ukrainian production and processing food industries, state the problem of monopolization of the food market and the dictates of trade networks. And the terms of cooperation with retail for us are frankly predatory. And medium and small food production businesses suffer from this the most. And in the future – the economy and ecology of the entire country. And – with delayed consequences for the long term. Are we ready to leave such a legacy to our children and the war-torn country?Advertisement: Professional supplier associations have repeatedly raised this issue at the highest levels of legislative and executive power. Read also: The impact of inflation on retail: how business adapts to new conditions A certain boost to possible changes for the better was considered the adoption in April 2019 by the European Parliament of Directive 2019/633 on unfair commercial practices in business relations in the product supply chain food.Advertising: The provisions of Directive 2019/633 apply to the relationship between suppliers of agricultural products and food products and their buyers in cases where one of them has greater market power (this is retail) and, accordingly, can establish known unfavorable conditions of cooperation for another In view of Ukraine’s commitment to the requirements of the Association Agreement with the EU to harmonize national legislation with the relevant European one, food manufacturers were very hopeful of the state’s attention to this issue and the actual eradication of shameful established domestic practices. To date, 5 draft laws have been registered in the parliament, which to some extent reflect the provisions of EU Directive 2019/633 regarding unfair practices in the supply chain of agricultural products, but in fact the entire three-year discussion of the parties at this stage has been reduced to a top-level question: should the state intervene in this dispute and regulate the legality of one of the parties. That not only does not reflect the essence of the identified problems, but also indicates a systemic reluctance to find a consensus and very manipulatively brings the prospect of their solution to a dead end. Because – war, not on time. Although the main sales channel for food products is still retail, and in fact, excessive and unreasonable destructive pressure on medium and small food manufacturing businesses persists. Crisis phenomena are also aggravated by a significant increase in the import of food products, the so-called “own” imports of trade networks, which in fact worsens the position of domestic producers even more in times of war. One of the keys to getting out of the impasse in relations between Ukrainian suppliers and retailers is solving the problem of returning unsold products whose expiration date is coming up. In our reality, such products are returned to the manufacturer, firstly, at his own expense, and secondly, – purely nominally, on paper, actually throwing the food into the trash. Agree, such a practice with a large number of unnecessary costs, product losses and environmental consequences cannot be called reasonable or effective. Moreover, in relation to the imported manufacturer, there is no such return practice. In the EU countries, this aspect of relations between manufacturers and retailers is solved in different ways. The specified Directive 2019/633, unfortunately, does not directly prohibit the retailer from returning unsold products to the supplier. But nevertheless, on its basis, in April 2021 (when it actually came into force in the EU countries), the German Bundestag approved a law according to which it makes such a direct ban on returning unsold products to the manufacturer. Other countries limit themselves to a legal ban on the destruction of expired but unsold food, obliging retailers to donate it to charities. After all, the actual shelf life of food products written off by retail chains allows for another 2-3 months of food quality that is acceptable for health and suitable for consumption. This practice exists in Italy (since 2016), France, Spain (since 2021), Belgium (since 2023), etc. Thus, the domestic supplier, especially SMEs, in these conditions essentially remains with 100% losses without relying on its own profit, which is eaten up by “cooperation” with domestic retail. It is not difficult to understand that this leads to the collapse of such businesses and the destruction of the support for ensuring food security and economic stability of the country. Therefore, we see that in order to solve these fundamental issues for the existence of the Ukrainian state and its European perspective, to improve the economic condition of food producers and the security of small and medium-sized food businesses, it is extremely necessary and urgent to establish a market-fair distribution added value in the producer-processor-consumer chain and the adoption of the relevant law that will comply with EU Directive 2019/633.