From farm to fork, brewery to bar, the journey to bring delicious creations to our tables is complicated.
Businesses in the UK’s vibrant food and drink sector manage intricate supply chains and a myriad of issues to keep the shelves stocked and restaurants thriving.
With rising input costs and import/export challenges in a post-Brexit/high tariff world, keeping prices competitive without compromising on quality is a constant battle. Then there’s the regulatory landscape, a shifting terrain of food safety standards, labelling requirements, and environmental concerns that can leave even the most seasoned entrepreneur feeling a little… well, seasoned.
And let’s not forget the sheer number of moving parts, from raw material suppliers, manufacturers, co-packers and logistics providers to organise just to have products to sell. And on the other side, you’ve got customers (whether retailers, wholesalers, restaurants or consumers) each with their own expectations and demands.
So, how do you keep the whole process from falling apart? A big part of the answer is having clear contracts. Contracts aren’t just for when things go wrong.
They set clear expectations for what each part of the supply chain should to do to get your products where they need to be, when they need to be there and to represent your brand well when they do.
So, where do you start?
Suppliers
- Be clear on specifications: clearly define the quality, quantity and delivery schedules for all goods and services. Specify what happens if the quality isn’t up to scratch – rejection rights, refunds or replacements should be clearly outlined, as should any specific expectations you have (e.g. ethical sourcing, brand presentation, accreditation requirements).
- Traceability is key: make sure your contracts require your suppliers to provide full traceability information. This isn’t just a regulatory requirement but is also vital for building consumer trust and demonstrating those all-important ESG credentials.
- Food safety first: your number one priority is to ensure your products are safe for your customers to eat or drink. Include clauses in your contracts that allow for audits, provide remedies if standards aren’t met, pass on liability for defective products appropriately and set clear expectations for managing recalls.
Contingency planning: hope for the best, plan for the worst. Include clauses that address potential disruptions and outline alternative supply arrangements or notification periods. If you’re offering any exclusivity or committing to minimum purchase levels, be sure to cover what happens to these if the supply chain gets disrupted.
Policies, policies, policies: you to have to ensure that your suppliers are meeting the standards you and your customers expect, both in terms of legal compliance and ethical trading more generally. Don’t take the traditional route of writing a policy for every issue (no-one reads them let alone complies with them). Instead adopt a short, clear Supplier Code of Conduct setting out your minimum expectations for anyone you work with.
Customers
- Know where you stand: if you’re mainly selling to retailers or major wholesalers, it’s likely that you won’t be able to negotiate legal terms. This doesn’t mean taking a ‘sign it and see’ approach. You still need to know what you’re committing to, so you can pass on risk and any customer requirements to your suppliers (and meet your own obligations).
- Be consistent: where you’re selling direct to consumers or to distributors, apply a consistent approach to their contracts. You need clear, reasonable and easy to implement terms for these customers that properly reflect your brand, legal requirements and internal procedures. Consistency makes these contracts easier to implement, manage and change where you need to.
- Payment terms: cashflow can be a huge challenge for food and drink suppliers. With a range of suppliers to pay, often before you’ve been paid yourself, every day of credit counts.
As well as careful cashflow modelling and tight credit control, make sure your various payment terms align as much as possible to stay out of the red.
- Delivery and acceptance: customer contracts must clearly define when products need to be delivered and when they’re accepted. Make sure your manufacturers and logistics providers can actually meet any commitments you’re signing up to with customers (sounds obvious but it’s missed a lot!).
- GSCOP: if you’re selling to the supermarkets, understand your rights and their responsibilities under the Grocery Suppliers’ Code of Practice. GSCOP is designed to ensure you’re treated fairly and gives you protection on issues like promotions, payment terms and de-listing. If you know your rights, you’ll know when they’re not being complied with.
Ready to take control of your supply chain?
Don’t let complex contracts become a recipe for disaster. Howes Percival’s Food and Drink team are experts at supporting clients to effectively manage their supply chain contracts and would be happy to offer a free benchmarking assessment of your current supply chain contracting.
