Grocery Supply Chains and the Food and Grocery Code: What It Means
Australia's grocery sector has been under more scrutiny over the past two years than at almost any time in recent memory. An ACCC inquiry into the supermarkets, a high-profile independent review of the code that governs supplier dealings, and sustained cost-of-living attention have all converged on the same set of questions. Most of the public conversation has been about prices on the shelf. But behind those headlines sits a supply chain story that matters just as much and gets far less attention: the relationship between the major grocers and the thousands of suppliers who feed them, and the terms, costs, and supply chain procedures that govern it.
That relationship is now regulated in a way it was not before. The Food and Grocery Code of Conduct, long a voluntary arrangement, became mandatory and penalty-backed from April 2025, and as of April 2026 it applies to every grocery supply agreement with the large retailers and wholesalers regardless of when it was signed. For suppliers and for the major grocers alike, how they deal with each other commercially and operationally is now subject to enforceable rules. And because what the code governs, supply agreements, trading terms, payments, ranging, and supply chain procedures, are supply chain and commercial decisions, this is as much a supply chain issue as a legal one.
This article is for grocery suppliers, retail and wholesale operators, and the supply chain and commercial leaders on both sides who need to understand what has changed and what it means operationally. It stays evenhanded and focused on the supply chain implications rather than the politics of grocery pricing, and it stays in the supply chain lane: the commercial economics, supplier relationships, and operating model, with the legal interpretation of the code left to legal advisers.
What has actually changed
Two connected developments have reshaped the landscape.
The first is the ACCC's supermarkets inquiry, directed by the government and running through 2024 and into 2025. It examined a sector that is, on the ACCC's own characterisation, an oligopoly: Woolworths and Coles together account for around 67 per cent of national supermarket retail sales, with Aldi at around 9 per cent and Metcash supplying the independents at around 7 per cent. The inquiry gathered extensive evidence, including from suppliers at roundtables across rural and regional Australia, many of whom said they felt they were receiving unsustainably low prices and had little choice but to accept unfavourable terms given the concentration of buyers. It is worth noting, in fairness to the full picture, that the inquiry also found food and non-alcoholic beverage prices had grown by around 23 per cent over the five years to mid-2024, broadly in line with inflation across the rest of the economy, a reminder that the supply chain story is more nuanced than a simple narrative in either direction.
The second, and more operationally consequential, is the Food and Grocery Code of Conduct. Following a review led by Dr Craig Emerson, the code was remade and made mandatory from 1 April 2025. It now applies automatically, with no opt-out, to large grocery businesses with more than $5 billion in annual revenue from their supermarket or grocery wholesaling operations, which captures Coles, Woolworths, Aldi, and Metcash. Suppliers to those businesses are automatically protected. The code requires the large grocers to have written supply agreements, to act in good faith, to refrain from retribution against suppliers who exercise their rights, and to follow rules on ranging, pricing, supplier payments, and supply chain procedures. It is backed by significant civil penalties, the ACCC can issue infringement notices and pursue court action, and it provides for dispute resolution through a Code Mediator, who can bind a supermarket to pay compensation of up to $5 million, and through arbitration. Importantly, a transition period for pre-existing agreements ended on 1 April 2026, so all code requirements now apply to all grocery supply agreements, regardless of when they were entered into.
In short, the rules governing how Australia's largest grocers deal with their suppliers have moved from voluntary good intentions to mandatory, enforceable obligations.
Why this is a supply chain story
It is easy to file this under legal compliance and leave it there. That misses the point. What the code regulates is the operating interface between the grocers and their suppliers: the supply agreements, the trading terms, the payment arrangements, the ranging and listing decisions, and the supply chain procedures by which goods actually flow. Those are supply chain and commercial matters, not merely legal ones.
The buyer-power dynamic the inquiry surfaced is, at its heart, a question about who bears cost and risk in the grocery supply chain. When a dominant buyer can impose terms, change supply chain procedures, shift costs, or vary arrangements at will, the risk and cost migrate onto the supplier, often a smaller business or a primary producer with little leverage. The code is an attempt to rebalance that, by setting rules of fair dealing and giving suppliers protections and recourse. Understanding and responding to it, on either side, is therefore a supply chain and commercial capability as much as a legal one.
What it means for suppliers
For suppliers to the major grocers, the code provides a meaningfully stronger floor. There must be a written supply agreement. The grocer must act in good faith. Agreements cannot be varied unilaterally without consent. Suppliers are protected from retribution for exercising their rights. A large grocer cannot require a supplier to materially change their supply chain procedures mid-agreement without giving reasonable written notice or compensating the supplier for the net costs of a failure to do so. Supplier intellectual property in branding and packaging must be respected. And there are real avenues, mediation, the Code Mediator, and arbitration, for suppliers to pursue when things go wrong.
These are genuine protections, and suppliers should understand and use them. But here is the practical insight that matters most: protections do not change the underlying commercial reality of supplying a highly concentrated market. The code gives suppliers a stronger floor; it does not give them pricing power or guarantee profitability. Real resilience for a supplier still comes from the strength of its own supply chain and commercial position, knowing its true cost-to-serve by customer and channel, running an efficient and reliable operation, delivering high service performance, and offering value the retailer cannot easily replace. A supplier that understands its own economics precisely, and can demonstrate efficiency and reliability, negotiates from a far stronger position than one relying on the code alone. The suppliers who will thrive are those who use the new protections and get their own supply chain and cost economics genuinely right.
What it means for the major grocers and wholesalers
For the large retailers and wholesalers captured by the code, the change is operational, not just legal. How their buying and category teams deal with suppliers, how they communicate changes to requirements, pricing, and promotions, how they vary supply chain procedures, how they document agreements, and how they keep records all now have to be done within the code, with significant penalties for getting it wrong.
That has real implications for the operating model. Supplier management processes, the way supply chain procedure changes are planned and communicated, the discipline around written agreements and notice periods, and the governance over how buyers deal with suppliers all need to be fit for a mandatory, enforced code. Requiring a supplier to change supply chain procedures, for instance, now carries a notice or compensation obligation, which means such changes have to be planned and managed deliberately rather than imposed at will. This is a process, capability, and supplier relationship management challenge as much as a compliance one, and the grocers that build it into how they actually operate, rather than treating it as a legal overlay, will manage both the risk and the supplier relationships better.
The bigger picture: grocery supply chains under structural scrutiny
Step back, and the code is one part of a broader structural scrutiny of grocery supply chains. The concentration of the sector, the buyer-power concerns, the sustainability of the prices paid to farmers and fresh-produce suppliers, the complexity of perishable supply chains, and the cost-of-living pressure on consumers are all pushing in the same direction: toward grocery supply chains that are more transparent, fairer in how cost and risk are shared, and more genuinely efficient.
That last point is the one both sides have a shared interest in. When a supply chain is genuinely efficient, lower in waste, better in forecasting and replenishment, more reliable end to end, there is more value to share and less pressure to extract margin from whichever party is weaker. The healthiest response to the scrutiny, for grocers and suppliers alike, is not just to comply with the code but to make the underlying grocery supply chain work better, through better demand planning, inventory, and replenishment, better cost-to-serve understanding, and more efficient distribution. A more efficient supply chain is the most durable answer to a fairness problem.
The Australian context
This is a distinctly Australian situation. The concentration of grocery retailing is unusually high, which is what gives the buyer-power question its force. Many of the suppliers most affected are in regional and rural Australia, including primary producers for whom the terms of trade with a dominant buyer are existential. The cost-of-living politics keep the sector under sustained public and regulatory attention. And the regulatory machinery is now live: the code is mandatory, the penalties are real, the ACCC is enforcing, and as of April 2026 the transition is complete, so every relevant supply agreement is captured. For anyone operating in Australian grocery supply chains, on either side, this is the current operating environment, not a future prospect.
How Trace Consultants can help
At Trace Consultants, we work on the supply chain and commercial side of this for both suppliers and grocery businesses. The legal interpretation of the code sits with legal advisers; the cost economics, supplier relationships, and operating model sit with the supply chain, and that is where we work.
For suppliers, we strengthen the commercial and supply chain position. We model your true cost-to-serve by customer and channel, improve supply chain efficiency and service reliability, and help you understand and present your economics, so you negotiate from strength and build resilience that does not depend on the code alone. This draws on our retail and FMCG, strategy, and cost-to-serve work.
For grocers and wholesalers, we build the supplier operating model. We help design the supplier management processes, supply chain procedure change management with proper notice and cost discipline, and procurement and supplier relationship practices that work within the code as a matter of how the business actually operates.
For both sides, we make the underlying supply chain more efficient. Through better planning, inventory, and replenishment and more efficient distribution, we help create the genuine efficiency that gives both parties more value to share and reduces the pressure that fuels the conflict in the first place.
Explore our supply chain and procurement capability →
Where to begin
If you supply the major grocers, start by understanding your own economics precisely: your true cost-to-serve by customer and channel, your service performance, and where you are genuinely efficient or not. That clarity, alongside understanding your protections under the code, is what lets you engage from a position of strength rather than dependence.
If you are a large grocer or wholesaler, look at how your buying and supplier-management processes actually operate against the code, particularly how supply chain procedure changes, communication, and agreements are handled, and build the discipline into your operating model rather than bolting compliance on afterward.
And on both sides, treat the efficiency of the underlying grocery supply chain as the shared prize. The Food and Grocery Code has changed the rules of how Australia's largest grocers and their suppliers deal with each other, moving the relationship from voluntary to enforceable. But the most durable response, for everyone, is a grocery supply chain that genuinely works better: more efficient, more reliable, and more transparent about where cost and value actually sit. That is what turns a regulated, sometimes adversarial relationship into one that can actually hold.
This article is general information and does not constitute legal advice. Businesses should confirm their specific obligations under the Food and Grocery Code of Conduct with their legal advisers.
Related reading: Procurement · Strategy & Network Design · Demand Planning, Inventory & Replenishment
