For most food and fresh produce suppliers, the supermarket relationship is the single most important commercial relationship in the business. It decides how much shelf space they get, which products stay in range and how much margin is left once promotions and rebates are paid for. The rules governing that relationship have changed significantly over the past 18 months, but in many founder-led businesses the way it's managed hasn't changed at all.

The Code Now Covers Every Agreement

The Food and Grocery Code became mandatory for large grocery businesses on 1 April 2025, and the transition period for older agreements ended on 1 April this year, which means the Code now applies to all grocery supply agreements. From 1 July, it has also been unlawful for the very large retailers, currently Coles and Woolworths, to engage in excessive pricing of grocery products. Large grocery businesses that breach the Code can face civil penalties, and the ACCC is responsible for enforcing it.

The detail matters as much as the headline. Under the updated rules, supermarkets must set out in their supply agreements the circumstances in which they can change terms, require payments or deduct amounts from supplier invoices, and suppliers can ask to renegotiate their terms at any time. Penalties for the most serious breaches can exceed $10 million.

What Suppliers Are Actually Experiencing

The Food and Grocery Code Supervisor published her first annual report under the mandatory Code in June, drawing on a survey of 419 suppliers. It found genuine progress. The share of suppliers saying they're always treated fairly and respectfully rose from 49% to 56%, and the share who fear retribution when raising concerns fell from 20% to 13%.

The same report shows how much pressure remains in the day-to-day negotiation. Around 44% of responses described price negotiations as involved or challenging, and half said retailers always or mostly push for extra margin and investment during range reviews. Small suppliers with turnover under $10 million reported some of the poorest experiences, and fresh produce suppliers found it particularly hard to negotiate prices they considered fair.

The Supervisor also made an observation that every supplier board should take seriously. Many suppliers told her they don't fully understand how the Code's protections work in the commercial reality of dealing with a retailer they depend on. With around 85% of food and grocery supply going through Woolworths, Coles, Aldi and Metcash, that gap between having rights and knowing how to use them carries a real commercial cost.

Why This Is a Leadership Question

It's tempting to treat the Code as a legal or compliance matter. In practice, it's a commercial leadership issue, because the Code changes what good negotiation looks like.

The report makes clear that the supplier experience is shaped by how separate conversations connect. A price increase request, a range review, a request for promotional funding and a decision about shelf space can all affect each other, even when they're presented as unrelated processes. A commercial leader who handles each of those conversations in isolation will lose ground, while one who sees the full picture can protect margin and range at the same time.

In many founder-led food businesses, the supermarket relationship is still run on personal relationships and goodwill, often by the founder or a long-serving sales Business Manager. That approach built a lot of successful businesses, and relationships still matter. But a negotiation that now runs on written terms, documented criteria and formal dispute processes rewards preparation, evidence and commercial discipline far more than it used to.

What the Commercial Leader Now Needs

The senior commercial role in a supplier business, whether it's a Commercial Director, Sales Director or General Manager who owns the retailer relationships, now needs a broader set of capabilities than it did a few years ago:

• A working knowledge of the Code, including the supplier's rights during range reviews, delistings and price increase requests, and when to involve the retailer's Code Mediator
• The financial depth to build a cost-based case for a price increase and defend it with evidence rather than relying on goodwill
• The judgement to see how price, promotions, range and shelf space connect, and to negotiate them as one commercial position
• The discipline to make sure every agreed change is documented in writing, as the Code requires
• The confidence to decline promotional spend that doesn't deliver a return, without damaging the long-term relationship
• The ability to report clearly to the board on trading terms, retailer margin and the commercial risk in each major account

That's a different profile from the classic relationship-led sales leader, and it's not one that every business has inside its current team.

What We're Seeing in the Search Market

In my experience running FMCG businesses, the supermarket negotiation has always been where margin is won or lost. In the commercial searches we run now, we're seeing boards place much more weight on commercial and financial depth alongside retailer relationships.

The leaders in highest demand are those who've managed major retailer accounts through the transition to the mandatory Code, who can talk confidently about cost-to-serve and margin, and who've shown they can hold a position in a range review without putting the account at risk. They're usually well looked after by their current employer, so attracting them takes a clear brief and a direct approach rather than an advertisement.

The other pattern we see is businesses promoting their best relationship manager into the top commercial role and expecting the rest to follow. Sometimes it does, but where the role now demands financial rigour and negotiation discipline the person has never had to show, the business often discovers the gap during its first difficult range review.

What Boards Should Do Now

Start by reviewing who leads your major retailer negotiations and whether they have the knowledge and support to use the Code effectively. Put trading terms, retailer margin and range review outcomes on the board agenda, so the commercial risk in your biggest accounts is visible rather than left with one or two people.

Where there's a capability gap, close it deliberately, whether that's through training, adding commercial finance support or appointing a commercial leader with the experience the role now requires. And if you're hiring, write the brief for the negotiation as it works today, not as it worked five years ago.

The Rules Have Changed

The mandatory Code has given suppliers more protection than they've ever had in their dealings with the major supermarkets. But protections don't negotiate on their own, and the suppliers who benefit most will be the ones whose commercial leaders know how to use them.

If you're a founder, CEO, or board member in a food, beverage or fresh produce business that supplies the major supermarkets, it's worth asking whether your commercial leadership has kept pace with the rules it now operates under.

ELR Executive is a specialist executive search firm focused exclusively on FMCG, food and beverage manufacturing, and fresh produce. If you're facing a senior leadership decision and want clarity before proceeding, a conversation with John Elliott may be a useful place to start.