Government urged to tackle supermarket home brands
Monday, November 28, 2011/
The Australian Food and Grocery Council is urging the Federal Government to appoint a Supermarket Ombudsman to control the amount of shelf space taken up by home brand products.
The move comes after William Johnson, chief executive of global food producer Heinz, hit out at Woolworths and Coles over the launch of home brand products.
Johnson said the move by the supermarket giants, to saturate the market with such products, is forcing the company to change its strategy to stay afloat.
“It’s almost come to the point that it’s become fairly immaterial to us going forward because it has taken such a hit,” he said.
“In Australia, we are confronting a combination of weak categories, relentless promotional pressure and growing private label, as well as executional, issues.”
It is the third time this year Heinz has criticised the two supermarkets for their practices, after similar complaints were aired by Heinz executives in August and June.
But Heinz isn’t the only company to complain about stiff competition posed by home brands.
Bread-maker Goodman Fielder threatened not to deliver daily to supermarkets because it could not match the lower prices of home brands, including bread priced as low as $1.
According to IBISWorld, home brands account for around one quarter of Australia’s $70 billion grocery market, with Woolworths announcing plans to double home brand sales.
Tom Griffith, of smoothie brand Emma and Tom’s, says it’s already hard enough for small suppliers to distribute their products in supermarkets, which can make or break a business.
“It really is all about distribution and delivery. Getting the product from the warehouse to the shelf is very hard. It’s a very competitive sector,” Griffith says.
In an address to the AFGC earlier this month, Innovation Minister Kim Carr says it’s “not good enough” for the government to walk away from the issue.
“I am particularly concerned about the market dominance of the two major supermarket chains, who now control 80% of retail food sales in this country,” Senator Carr said.
“For most food manufacturers, their main access to customers is through the supermarket chains.
In practical terms, you deal with Coles and Woolworths or you go out of business.”
“Together with the Australian Food and Grocery Council, we are determined to address the complaints brought to us by many local firms.”
Kate Carnell, chief executive of the Australian Food and Grocery Council, says the council is urging the government to appoint a Supermarket Ombudsman to level the playing field.
According to Carnell, the Ombudsman would oversee a Fair Trading Code of Conduct, possibly within the Australian Competition and Consumer Commission.
“We hope that this would include a limit on the amount of shelf space that could be taken up by private label or brands owned by major supermarkets,” Carnell says.
“This would ensure that Australian manufacturers continue to have fair and equitable access to [the] market.”