The Australian Food and Grocery Council claims Woolworths is giving a number of suppliers two weeks to find cost savings of between 5% and 10% or have their products removed from sale.
The Australian Food and Grocery Council issued a briefing note to its members this week advising them suppliers to Woolworths had been told to slash their “trading terms”, according to Fairfax.
The note said Woolworths had justified the cuts by claiming suppliers were price-gouging.
Claire Kimball, spokesperson for Woolworths, told SmartCompany it was difficult for the supermarket to respond to general claims without having seen the AFGC briefing paper.
“We want to be able to address specific claims and we are disadvantaged by criticism that we can only give general responses to.”
Kimball says Woolworths “fundamental principle” in any negotiation is to get the best deal for its customers.
“Negotiating terms of trade is something we do day in and day out and there is nothing unusual happening at the moment.
“Achieving the best outcome for our customers is what drives our negotiations with vendors. Any conclusions reached in negotiations have to be mutually agreed between us and the vendor.”
Kimball says Woolworths uses sales and customer data to inform negotiations.
“There is no two-week completion cut off in our negotiations,” she says.
“When we put our position to vendors we often ask them to come back to us in two weeks with their response.
“However, it is a negotiation and this often necessitates ongoing discussions and this happens regularly.”
The Australian Competition and Consumer Commission has been looking at concerns raised about the way in which the major supermarket chains deal with their suppliers for a while now.
“The ACCC has been engaging with suppliers and representative groups in relation to these issues and has encouraged any person with concerns to contact us,” ACCC spokesperson Brent Rebecca told SmartCompany.
“The ACCC’s consideration of the matters is progressing well with the benefit of information that has been provided to date.”
Both Woolworths and Coles appeared before a Senate inquiry into food manufacturing earlier this year to defend claims that they were squeezing out suppliers and increasing sales on cheaper private label products at the expense of branded competitors.
SmartCompany attempted to contact the AFGC this morning but no response was received prior to publication.