They're talking about the great Australian food sector squeeze from Brunswick to the bush.
Following a string of food company collapses around the nation, the market power of supermarket giants Coles and Woolworths will go under the microscope today as part of the Senate's inquiry into the perilous state of Australia's food processors.
SMEs have been hit hard. But, in one Victorian town, a farming family has already started fighting back - one milk carton at a time.
After Coles and Woolworths started selling milk at $1 a litre last year, a Ballarat family retaliated by launching its own brand of milk.
The Britt family has been farming at Dunnstown since the 1800s and over the past few years the family has invested more than $1 million into building a processing and bottling plant, which began production in December.
A family member and a joint manager of the business, Rachael Peterken told SmartCompany the Britts went into production to sustain the family farm.
"One reason was value adding and providing sustainability for the farm. It is very, very difficult to make a profit out of dairy farming out of the price being paid for milk at the moment," says Peterken.
"We produce the product and wanted to be the middleman and get what everyone else was getting at the time.
"The other reason was people asking to buy milk direct from the farm and saying milk does not taste the way it used to taste and, obviously, legally we could not do that."
Peterken says supermarkets and retailers paid "what they could get away with".
"The cost of everything goes up: fuel, machinery, seed, fertiliser, but the price you get from the milk doesn't.
"It does have to roll out somewhere and the people it affects are the processors and the farmers.
"The processors are having to provide it cheaper and the farmers have to provide it cheaper. It certainly isn't the big players who are being affected.
Peterken says people need to be educated about what they actually get for their money.
"A lot of farmers are doing farmers' markets and selling on the roadside so they can get better money for the product, which takes time but does give them more reward.
"Buying local and buying fresh may cost that little bit more, but we won't have the option in a few years to come."
The Britt family have escaped the fate of many farmers and high-profile Australian producers including SPC Ardmona, McCain, Heinz, National Foods and SP Exports, who have closed their doors or scaled back their businesses over the past two years.
Suppliers and producers have accused Coles and Woolworths of being partly behind these collapses and closures as a result of ever-tightening margins.
The Australian Food and Grocery Council points the finger at the "aggressive behaviour" of Australia's highly concentrated food retail sector, saying it adds to the stress of food and grocery manufacturing.
The AFGC estimates Coles and Woolworths have nearly 80% of the market, which it says allows the supermarkets to put "extreme pressure" on suppliers to support their aggressive price competition.
The big supermarket's dominance is something that does not sit well with many consumers. The 2012 Eye on Australia report, based on interviews with 14,000 Australians, found that 75% believed Coles and Woolworths have too much dominance and only 28% trust the big supermarkets to do the right thing by the consumer.
SmartCompany spoke to suppliers and producers who said the supermarkets were using their dominance to focus more on private label products, use more overseas suppliers and to put suppliers and producers under pressure to squeeze prices.
Increasing emphasis on private label products
Private label products are becoming more popular in Australia, with the 2012 Eye on Australia report finding that 38% of 14,000 Australians surveyed spending more on house brands.
Research firm Nielsen estimates private labels will represent 40% of packaged goods sales by 2015.
Cost is the key driver behind the popularity of private labels, with 55% of those surveyed by Eye on Australia checking supermarket prices more often and 32% agreeing that the big two supermarkets are doing a good job at keeping costs down.
However, the downside of this low-cost alternative is that it is likely to lead to less choice in the supermarkets.
Braeden Lord, chief executive of grocery delivery service Aussie Farmers Direct, told SmartCompany he expects private labels will become more dominant on supermarket shelf space and will capture increased margins for the supermarkets in line with international trends.
"Ultimately, if you are left with two or three products and one or two is a private label, you have an opportunity in the future to ratchet up pricing, because there is a lack of choice for the consumer, so the consumer pays more and the supermarket captures more of the margin," says Lord.
Woolworths currently stocks about 2,500 private label products out of about 35,000 individual products in the supermarket, according to Siobhan Quinn, spokesperson for Woolworths.
She says home brand products make up less than 10% of total stockkeeping units at Woolworths and, by sales volume, home brand makes up "just over 10%".
"When it comes to our own label, our preference is to use Australian suppliers so long as we can get the quality and supply and secure products at a price that our customers would be willing to pay," says Quinn.
"Own label products are produced by a range of well-known manufacturers and smaller suppliers. In fact, own label has enabled many smaller suppliers, who might not otherwise have had the opportunity to be ranged in a supermarket, to find space on the shelves."
Coles did not reply to SmartCompany's request for comment. The supermarket did, however, defend the increase in stocked private label products in its submission to the Senate Select Committee, stating: "greater penetration also aids retailers to achieve lower prices in their bargaining dynamics with food processors."
"At the very least it aids in enabling retailers to ascertain whether proposed price increases from suppliers are the result of genuine upstream cost increases or are an attempt to pad out supplier margin."
In comparison, Theo Stratopoulos the general manager of Retail Operations at Foodworks, told SmartCompany the local supermarket carries a "miniscule" number of private label products.
Foodworks has a 2.5% share of the grocery industry and Stratopoulos says its main focus is on buying branded products.
"We do offer milk, bread and some of the basics like cans of tomatoes [as private label]," says Stratopoulos.
"We currently have about 120 lines of Foodworks Best Buy and your average store carries about 14,000 lines in total.
"We are very focused on what the customer wants rather than making the customer buy what we want.
"If they want a packet of cornflakes we will give them a packet of cornflakes."
Less Australian produce and manufacturing
One of the concerns about the growth of private labels is the fear that many of these new products are being sourced from cut-price offshore manufacturers.
The Australian Workers Union made a submission to the Senate enquiry arguing that Coles and Woolworths had too much power because they were acting both as producers and retailers.
"They are driving independent brand manufacturers out of the market or offshore," said union boss Paul Howes.
Woolworths would not reveal the percentage of its packaged goods which are made in Australia, but Quinn says Woolworths supports Australian suppliers whenever possible, with 100% of the supermarket's fresh meat and 97% of its fresh produce from Australia.
"When it comes to fresh food, Woolworths' aim is to purchase as much produce as possible from Australia and we only import when we cannot get the quality or supply domestically – usually when produce is out of season," says Quinn.
"We have an import replacement program, where we work with growers to produce fresh food not usually grown in sufficient quantity for our stores.
"This program has seen over half of all garlic on sale at Woolworths stores now coming from Australia, a marked difference to five years ago when it was almost fully imported."
Stratopoulos says Foodworks can be distinguished from the "big two", Coles and Woolworths, by its emphasis on local products, with approximately 95% of it private label products made in Australia.
"We encourage our stores to promote local growers wherever possible. That is a big part of what we do and, really, we work together with them particularly in regional areas and basically get the food from the farm gate to the table," says Stratopoulos.
The Senate enquiry has also heard from farmers and producers who claim the dominance of the supermarkets results in pressure to cut margins.
John Hazeldene, managing director of Hazeldene's Chicken Farm, produces chickens that are sold under both Coles and Woolworth's private labels.
Hazeldene told the committee Woolworths had been a client for 35 years, while Coles had become "really entrenched" as a client more recently.
"They are a big player for us. They are starting to exert a little bit of pressure," he said.
"The biggest trouble is that Coles and Woolies are fighting one another, like cat and dog, and we are fighting our own opposition. They are going to play one off against the other.
"They are actually just screwing us big time at the moment, but they are not playing us off so much.
"They are very careful not to overstep the line."
Lord told SmartCompany of a culture of fear amongst suppliers and said many farmers were not prepared to speak to the media or to supply to alternative sources as a result.
"I think that because they have a dual relationship there is an intimidation and a bit of a fear factor within the marketplace that if certain producers are seen to be providing too greatly to alternates outside the supermarkets, it does place a bit of pressure on their relationship with the supermarket," he said.
"When you have such a concentration of market power, you never know."
However, Quinn defended Woolworths' relationship with its suppliers.
"Woolworths' relationships with suppliers, large and small, are excellent and we put an emphasis on long-lasting, mutually beneficial partnerships so that our customers always get the highest quality products," she said.
"In addition, we have recently launched Speak Up, an externally-hosted hotline for suppliers to report matters of a serious nature where the standard escalation procedures have either been exhausted or are not an option.
"This is part of Woolworths' commitment to continuous improvement, transparency and accountability.
Delivery companies provide alternative
Lord sees his online delivery service as providing a genuine alternative to supermarkets for both suppliers and consumers.
Aussie Farmers Direct has experienced growth of 400% over the past five years moving from turnover of $28 million a year to $150 million in 2012.
Lord told SmartCompany the more the business has been growing, the more it is seen as a "good quality third option outside of the major supermarkets".
"The stronger the two majors become, the more crumbs that fall on the ground for other savvy and real retailers that are out there," says Lord
"With the price wars and private labelling, the more homogenous they become, the more differentiating we can be."
Lord says Aussie Farmers Direct has been able to benefit from some suppliers being squeezed out by the supermarkets.
"A particular lamb producer out of Victoria has approached us with ranges of lamb that they don't have an outlet for now that they lost supply into one of the major supermarkets," says Lord.
"They approached us with great cuts of lamb, top quality; but when you lose a major supermarket supply, whether you are a very large manufacturer or abattoir, then you are in dire straits, there is no doubt.
"One of our suppliers was a pork and ham supplier into Coles supermarket. They kept on getting squeezed on margin and decided it was not the game for them and, fortunately, [they] happened to be around the corner from one of our warehouses and now they supply us with all our ham and deli products, and they were able to find an alternative."
Lord says Heinz's retreat from country Victoria to New Zealand is likely to involve another move in a few years time farther offshore.
"Unfortunately the road to the lower cost product does not have a favourable outcome for the Australian community," says Lord.
"There are serious opportunities out there and we have customers buy from us because they like the price, range and quality and they also love buying from us because they want an alternative."
Another alternative to the supermarkets are farmers' markets, which are growing in popularity.
Ewan McEoin, founder of The Locavore Edition, told SmartCompany farmers markets are the best place to start for consumers who want to buy produce outside the main supermarkets and for suppliers who want to bypass the traditional supermarket route.
The Locavore Edition is a website partly funded by the government that publishes the stories and experiences of regional food producers.
"35,000 people visit farmers' markets in Victoria every weekend, so it is getting to a critical mass," says McEoin.
However, McEoin says despite the increased popularity of farmers' markets "most people still buy from supermarkets" and so it is important to work towards change in the supermarkets.
"We need to be realistic about how many people will go to farmers' market or buy direct," says McEoin.
"The reality is there needs to be a better collaboration between supermarkets and their regional growers."