Design of a Code of Best Commercial Practices to enhance relations between supermarkets and their suppliers

By Dr. Fernando Brom   

Paper presented at conference: Supermarkets and Agricultural Development in China: Opportunities and Challenges. May  24-25, 2004, Shanghai, China

Argentina is a country where almost all big and global  players of the supermarket business are present. Sixty percent of consumption is run by small or medium sized traditional stores (accounting 100.000 outlets) and forty percent of consumption is concentrated in big supermarket chains. The top 4 chains concentrate 70% of the business with less than 600 stores. During the 90´s all of them made huge investments , opening or remodelling more than 400 new stores. A trade war, mainly based in low prices and agressive promotions , threatened profitability of both parts: Supermarkets pretending from their suppliers to finance the competitive war; and  Suppliers fuelling this war with aggresive trade marketing in order to maintain or increase share of market.

The  bargaining power was exclusively on the side of the most powerful and big players, leaving without defense the  vulnerable players (small or medium firms, big multinationals with strict terms, brands with low market share,etc). In this unstable scenario (inflation, reccession and unemployment combined) somebody had to write the rules  of the game, the limits of the battle field, the limits between competition and predation. The COPAL Association (Coordinator of Food Industries Associations,), nucleating more than 48 associations and 2,000 firms, convoked CAS (Argentina Supermarkets Association), to agree a frame of reference and as well settle an agile and inexpensive mechanism of disputes arbitration and resolution. After 2 years of meetings, negotiation and agreements, and thousands of debates, a final text was agreed upon in July 2000 and finally signed in September 2000 betwwen both Associations under the name of GOOD COMMERCIAL PRACTICES CODE, as a PRIVATE SELF-REGULATION MECHANISM TO SOLVE CONTROVERSIES.

Full paper at http://cati.csufresno.edu/CAB/rese/ShanghaiConf/Fernando%20Brom/Fernando%20Brom-paper.doc