Supermarket giant Woolworths says it will deliver some relief for small and medium grocery businesses with the announcement of a new plan to start sourcing products from SMEs to emphasise local produce.
The move comes as producers continue to voice their concern over the shift to private label foods by the supermarkets, which is increasingly locking out smaller food manufacturers. Many have already collapsed.
Last week, that battle was exacerbated when Coles announced more price cuts for 100 of its popular products.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
Eric Robinson, who is the head of the Port Macquarie Food Company, one of the first suppliers to work with Woolworths in its initiative, told SmartCompany the move has given his business a significant boost.
“Woolworths is embracing what the consumer wants, which is more local produce, more fresh produce, and I think there’s a greater call for that,” he says.
Woolworths announced the plan yesterday, which will see the company prioritise local producers which may not necessarily have the scale to supply the entire Woolworths network. Instead, they’ll focus on a few dozen stores, or as few as two or three, depending on the company.
Businesses will see their produce featured in special “local” sections of the supermarket.
“People are more and more focused on their own area – WA grown, Queensland or Tassie grown rather than just Australian,” Woolworths head of supermarkets Tjeerd Jegen told The Australian yesterday.
The company has employed buying teams in every state to source local produce. Once a contract is set up, suppliers can deliver their wares straight to the supermarkets – each supplier will only need to work with a few different locations.
“This is an additional outlet for them, so we don’t want to disturb their existing business and we’ll follow their recommendation on pricing. There won’t be any negotiation for us to get more profit out of these lines – it’s purely an added benefit for customers.”
The Australian Food and Grocery Council, which has been critical of the push towards private labels, told SmartCompany this morning it supported the move.
“We make no secret of the fact thousands of good manufacturing producers rely on retail in Woolworths and Coles. While we’re waiting for more detail, as a concept we welcome the announcement,” a spokesperson said this morning
Robinson, who previously worked as a chef before starting his food business, told SmartCompany the move will not only provide money for the Port Macquarie Food Company, but for local farmers and producers.
“The farmers are excited, they’re very happy. We’ve spoken to one farmer for strawberries, and he’s put just another shed in that’s going to house 16 tonnes per annum.”
“It’s exciting for us. We’ve employed another two people just to help support the brand,” he says.
Food manufacturers have suffered over the past few years due to the supermarkets’ price war and several businesses have collapsed.
Robinson says the new Woolworths initiative provides some hope for smaller businesses at getting their foot in the door.
“It’s good for the industry, and it’s extremely exciting for us,” he says.
The Port Macquarie Food Company will supply 43 stores, while another business, Rhu Bru Jam in Tasmania, will supply three different locations.