The head of Wesfarmers has spoken out against the country’s food and grocery suppliers and their complaints over the supermarkets’ dominance, saying those same suppliers were raising prices well before both Coles and Woolworths began its discounting war.
The comments come as the food and groceries industry continues to battle over the issue of lower prices at supermarkets, along with a push to more private label goods.
In an interview with Business Spectator, Wesfarmers chief Richard Goyder says the suppliers are as much to blame for their current predicament as the supermarkets themselves.
His comments come as the Australian Competition and Consumer Commission has said it will begin an investigation into the supermarket industry. Goyder says the investigation can “turn a spotlight on what’s going on in the supply base…they are using the blame game with Coles and Woolworths to deal with their own efficiencies and shortcomings”.
Goyder also said suppliers were happy to increase prices, but weren’t so happy to accept competition. He also criticised the view of the dairy industry, saying he doesn’t believe the ACCC investigation will solve its problems.
“…the plight of the dairy farmers will be solved through stronger export markets for milk and a lower Australian dollar and/or improved efficiency at processing businesses in Australia,” he said.
However, a spokesperson for Australian Dairy Farmers told SmartCompany this morning the notion the industry can solve its problems purely through exporting is “simplistic”.
“It doesn’t give a clear picture of a variety of issues the industry is facing,” the spokesperson says. “You have a supply chain that’s also unsustainable, there are thin margins for the farmer and the margins for the processor are very thin as well.”
The ADF also took issue with Goyder’s claim Coles’ milk only makes up 4% of milk produced in Australia, saying the figure was more likely 20% based on the organisation’s own data.
“Coles’ own label milk is 4% of milk produced in Australia and whether we sell it at $1 or $2 a litre; frankly it wouldn’t make one iota of difference for the profitability of dairy farmers in Australia. It makes a difference for our profitability, but none to dairy farmers.”
The ADF said given the value of the Australian dollar is out of the organisation’s control, simply saying the market could improve by exporting more is a “simplistic idea”.
The Australian Food and Grocery Council was also contacted this morning, but no response was available prior to publication.
Suppliers have been up in arms over the supermarkets’ price wars, with several companies having collapsed since the discounts began.
However, Goyder said in the interview he believes suppliers have been getting stronger.
“I think our arrangement with suppliers and our relationship with suppliers have done nothing but got stronger since we acquired the business,” he said.
“We’ve got significantly higher turnover in Coles than we had in 2007 and they’ve got much greater visuals through the business now on what our orders are likely to be. Their orders are stronger. As in all of these things, there are some winners and losers and often it’s the losers who make all the noise.”
He also said he doesn’t believe food suppliers have put enough investment into their own businesses.
“So like all businesses in Australia, food processors need to be efficient, need to be innovative and creative, need to be looking for new markets,” he said.