The risks of difficulties with the supply of food products due to the partial mobilization announced in Russia may require easing working conditions for market participants. According to Kommersant, the Ministry of Industry and Trade has already recommended that chains introduce a moratorium on fines for manufacturers for missing deadlines or incomplete fulfillment of orders. Similar measures were taken after the outbreak of hostilities in Ukraine. Suppliers consider it necessary to fix the moratorium in an intersectoral agreement, and experts point to the risks of abuse of the measure.
The Ministry of Industry and Trade recommended that retail chains introduce a moratorium on the application of penalties to suppliers for late or incomplete fulfillment of orders, two sources told Kommersant in the market. According to them, the recommendation was made on September 27 at a meeting with Deputy Head of the Ministry of Industry and Trade Viktor Yevtukhov.
Kommersant's source says that the recommendation is "verbal" and was given in connection with possible interruptions in logistics due to the announced partial mobilization.
As Mikhail Burmistrov, CEO of Infoline-Analytics, notes, if the issue with production personnel can be resolved, the departure of a large number of drivers will hit the supply chain of large and small companies. X5 Group (Pyaterochka, Perekrestok, Karusel, Chizhik), Magnit, Lente, Auchan and Metro did not answer Kommersant's questions. The Association of Retail Companies declined to comment.
Viktor Yevtukhov told Kommersant that the Ministry of Industry and Trade is in constant interaction with the manufacturing and trading business and continues to draw the attention of chains and suppliers to the need for a balanced and painstaking approach to the implementation of the terms of supply contracts.
As Mr. Yevtukhov noted, the Ministry of Industry and Trade periodically reminds market participants that it is necessary to work "together and harmoniously."
The Ministry of Industry and Trade after the outbreak of military operations of the Russian Federation in Ukraine has already recommended retail chains to introduce a moratorium on fines against manufacturers who, for objective reasons, cannot fulfill their obligations in March of this year. As the interlocutors of Kommersant among suppliers then explained, concessions are necessary to prevent empty shelves amid increased demand, logistical failures, rising costs, etc. (see "Kommersant" dated March 5).
Dmitry Vostrikov, executive director of Rusprodsoyuz, says that manufacturers are already reporting an increase in orders from some retail chains by 10-20%, and the problems that arose after the pandemic and the military operation in Ukraine have not disappeared. Difficulties with logistics, the need to make a 100% prepayment for raw materials and ingredients, a long period of payment for delivered orders by chains have led to a reduction in the working capital of manufacturers to a minimum, Mr. Vostrikov points out.
The head of the National Meat Association, Sergei Yushin, explains that during the pandemic, companies began to experience production and logistics failures, including due to the illness of employees, and chains noted an increased demand for products. At that time, the rejection of fines against suppliers made it possible not to aggravate the situation, but today there are similar risks, so a moratorium is necessary, he believes.
According to Mr. Yushin, it is worth formalizing the moratorium through the signing of agreements between the relevant associations and preventing the retrospective imposition of sanctions after a considerable time has passed.
In April, Rusprodsoyuz informed the Ministry of Industry and Trade that a number of networks did not fully accept the recommendations of the ministry or accepted them “nominally”, and increased the fines themselves.
As Mikhail Burmistrov notes, networks do not always penalize suppliers after clarification of the circumstances. In addition, he adds, it is necessary to stop the possible abuse of indulgences by manufacturers. Some of the unscrupulous players, the expert explains, used the moratorium, supplying goods in conditions of increased demand to points where profitability is higher.