Coca-Cola Amatil boss enters supermarket debate

Terry Davis, chief executive at Coca-Cola Amatil (CCA) has announced his support for the ACCC's investigation into alleged bullying tactics by the supermarkets, but insists the government needs to step in too.

Davis told the AFR that rather than having an industry ombudsman, Australian manufacturers need the government to take action and inspect supermarket practices, including forcing prices down to such a degree that they become "loss leaders."

"They [supermarkets] have responsibility to use that market power wisely and for the good of their shareholders but also the good of the communities they operate in, just as we have a responsibility to be a good corporate citizen in the communities we operate in," he said.

CCA's SPC Ardmona brand has suffered because of competition from cheap imports, with up to 90 percent of packaged fruit and vegetables now imported from countries including Thailand, South Africa and Vietnam.

Davis added that the Sheparton fruit growing community has also been hit hard by supermarkets prioritising private label products.

Accelerating depreciation and restructuring the Fair Work Act to improve flexibility and cut costs should be focus areas for the government, he said.

"You can take a big stick to the retailers and say it's all your fault – I don’t believe it is all their fault – or find ways to make it an easier place to manufacture in.

"That can be done in many ways by providing incentives for Australian manufacturers to not move offshore and not close down manufacturing operations," Davis said.

The ACCC announced last week that it will be investigating claims the supermarket duopoly uses bullying tactics to drive prices down, with 50 producers said to have come forward with evidence of misconduct.

Cattle farmers have already started speaking out about their treatment by Coles and Woolworths, with one producer claiming to have lost $80,000 in the last financial year.

The AFR reports that in its investigation, the ACCC could also consider CCA's losses, with the company bleeding millions in 2011 after a dispute over trading terms saw its leading brands taken off promotion in Woolworths between May and October.

The ACCC has given conditional backing to a legally-enforceable code of conduct for supermarket behaviour, but Davis – who also opposes the introduction of an industry ombudsman – believes what the industry needs is less regulation, not more.

Coles and Woolworths are working with the Australian Food and Grocery Council and the National Famrers Federation to develop a voluntary industry code of conduct.

 

Greens’ country of origin Bill fails to protect Aussie jobs: AFGC

A Greens Bill which aims to change regulations surrounding Country of Origin labelling has the potential to mislead consumers and drive jobs offshore, says the Australian Food and Grocery Council (AFGC).

The Bill [The Competition and Consumer Amendment (Australian Food-Labelling) Bill (No.2)] focuses purely on food ingredients and is being examined by a Senate Committee in Hobart this week. According to AFGC CEO Gary Dawson, it fails to provide clear information on where the value-adding process takes place on processed foods.

"The Greens' Country of Origin Labelling proposal fails its own test in protecting Australian jobs by effectively ignoring the economic value-add of the nearly 300,000 Australians employed directly in the food and grocery processing sector, including 8,000 in Tasmania," said Dawson.

"And worse, it expressly bars companies from using 'Made in Australia' on their labelling to indicate that the jobs in the manufacture of the product are here in Australia. This will not only mislead Australian consumers, but also remove any export advantage Australian food manufacturing companies have in promoting Australian premium brands particularly in Asian markets."

Dawson says that under the Bill, chocolate processed in Australia wouldn't carry 'Made in Australia' on its label because the cocoa is imported. Australian wheat shipped to China where it would be processsed and transformed into noodles, for example, before being packaging and imported into Australia could carry 'Made of Australian ingredients' on its label – "duping consumers into thinking it had been manufactured here," said Dawson.

He said the Bill threatens to penalise Australian manufacturers through increased regulatory compliance and costs.

"It would be a great irony if the implementation of Country of Origin Labelling regulations – that imposed additional costs but failed to provide consumer information on where products were manufactured – contributed to driving Australian jobs offshore," he said.

Earlier this year Choice proposed a new Country of Origin labelling system, breaking it down into three categories:

  • ‘Product of Australia’ – a claim about where the ingredients are from and where they are processed
  • ‘Manufactured in Australia’ – a claim about where the food was manufactured
  • ‘Packaged in Australia’ – a basic claim to accommodate products which by law have to carry an origin declaration. Products with this label would contain ingredients from different countries.

 

AFGC praises Kraft for manufacturing innovation

The Australian Food and Grocery Council (AFGC) gave food brand Kraft and the Victorian government a big pat on the back last week following the official opening of Stage One of Kraft Foods’ Asia Pacific Centre of Excellence in Ringwood, Melbourne.

AFGC CEO, Gary Dawson, said the centre provides a model for food manufacturing innovation that will enhance industry competitiveness and bolster manufacturers’ capacity to take advantage of export opportunities, particularly in Asia.

“Innovation is of critical importance to Australia’s $110 billion food and grocery manufacturing industry. This important investment by one of the most significant global food manufacturing companies underlines Australia’s potential to become a major manufacturing hub for the Asian Century,” said Dawson.

He said Kraft wants to use the centre to help in the development of new, innovative products and processes for both Australian and Asian markets.

“It’s ambition is to enhance collaboration between the food industry, research agencies and both large and small companies in the food manufacturing sector, unlocking the innovative capacity of Australia’s advanced food manufacturing sector.

Dawson said the centre is a perfect example of the type of food industry innovation hub recommended by the Prime Minister’s Manufacturing Taskforce, but said more innovation is required.

“In 2009-10 industry spent $466.7 million which was consistent with a three year trend of R&D growth. Governments have key roles to play in setting policies that enhance industry competitiveness by encouraging innovation, R&D and business operations.

“Innovation is at the heart of the industry's vision for a competitive future and it maintains a huge potential for growth into Asia. Governments can back the innovative capacity of Australian food and grocery manufacturers by easing the regulatory burden and through R&D tax incentives and accelerated capital depreciation to maintain and enhance the industry’s competitiveness,” he said.

 

Good times continue for supermarket duopoly

Coles and Woolworths are expected to report their strongest quarterly sales growth for more than a year later this week.

According to AFR, analysts believe December's hot, dry weather helped drive demand for fruit, salad vegetables and alcohol, with solid volume growth in supermarket and liquor retailers.

Food price deflation has also eased, which, when delivering the CHEP AFGC Retail Index, AFGC's Gary Dawson said is consistent with the food manufacturing industry's expected modest growth for 2013.

Wesfarmers, which owns Coles, is due to release its second quarter sales on Wednesday this week, with Woolworths following suit on Thursday.

Analysts are predicting Woolworths' same store sales in Australian supermarket and liquor stores to have risen by between 2.5 and 3.5 percent in the December quarter, AFR reports. This is compared to 1.1 percent in the second quarter of 2012 and 2.3 percent in the first quarter of 2013, and would be the supermarket giants' strongest growth rate in five quarters.

Sales at Coles are expected to jump by at least four percent compared with 3.7 percent in the first quarter of 2013 and could be its strongest growth rate in four quarter.

Earlier this month news broke that Australia has the fastest falling food prices in the developed world, after previously having the reverse title – fastest rising food prices – from 2000 to 2009.

Local food costs dropped 2.7 percent in the 12 months to the end of September – the biggest food price decline in the recent past, thanks to fruit prices normalising following the Queensland floods in 2010/2011, the Victorian floods of 2011 and Cyclone Yasi in 2011, as well as the end of the drought and the strong Australian dollar.

Coles also made headlines recently by announcing the expansion of its Down Down range, with more than 100 products added.

The AFGC hit out at Coles, however, arguing that the supermarket brand is reducing the range on offer to consumers and focusing on its own private label products.

 

‘Modest’ growth for food and beverage industry

The Australian Food and Grocery Council (AFGC), together with CHEP Australia, has released its latest Retail Index, which predicts the state of the retail industry based on pallet movements.

The Index showed three percent growth in December 2012 compared with December 2011, and looking ahead, this growth is expected to hold steady in February 2013 when compared to the same period last year.

Growth is also expected to sit at three pecent for the March 2013 quarter.

The food and beverage industry is in a slightly better position, said AFGC chief executive, Gary Dawson, but is still struggling with the same challenges faced by all retailers.

"Food is seeing growth of a bit above four percent," Dawson told Food magazine. "So food is performing a little stronger than retail overall but the picture is one that’s consistent with pretty fragile consumer confidence. It’s consistent with really thrifty consumers at the moment, consumers are looking for value, it’s consistent with a picture that says cost of living is a real issue across the community, and so overall turnover is growing but it’s growing at a pretty modest level.”

And based on the Index's predictions, modest growth can be expected throughout the year.

"Predictions are for that modest growth to continue into 2013. Now this doesn’t take into account things like the intense heatwave we’ve seen recently, so that could affect it. It doesn’t take into account the possibility of further interest rates movements downwards, which might give confidence a bit of a lift, but at the moment the picture’s one of pretty modest growth," he said.

The Index's findings suggest retailers won't experience the lift in sales they've been hoping for, but according to Dawson, food and beverage industry members can be grateful that they're sheltered from some of the struggles faced by others in retail.

"Everyone eats, so food retail doesn’t tend to be as volatile as some other retail sectors. [Food’s four percent growth rate] is consistent with the fact that online retail hasn’t made as many inroads into food as it has in some other categories, and the modest growth is consistent with the fact that we’ve had about 18 months of food price deflation, which is now starting to wash out of the system," said Dawson.

Planned investment to improve efficiency and productivity, and a focus on innovation to capitalise on expanding Asian markets are priorities for retail in 2013.

Continued investment in innovation and research and development is key to driving growth, Dawson added, but minimising red tape would also help.

"Of course it would help if we could see some reduction in regulatory burden, or at least a slow down in the rate of new regulations … Assistance with compliance costs and reducing red tape would be very beneficial, along with measures to stimulate and encourage innovation.

"Any additional regulation that increases costs is going to drive production and jobs offshore. It's a simple and hard truth. There is additional regulation in the pipeline, as we've seen with the new regulations around health claims," said Dawson.

The next AFGC CHEP Retail Index will be released in late April 2013. To read the Index and access more background information, visit www.afgc.org.au or www.chep.com.

 

Coles slams AFGC for telling half the story on price cuts

After the expansion of its Down Down campaign, the Australian Food and Grocery Council (AFGC) criticised Coles for limiting its product range, but the supermarket giant claims only half the story is being told.

Earlier this week Coles announced it was adding more than 100 private-label products to its Down Down range.

Soon after, the AFGC issued a statement slamming Coles for focusing on their own private-label products, and consequently limiting the range on offer to consumers.

The industry group cited research released by Coles and conducted by Deloitte Access Economics which claimed that Coles' product range dropped 11 percent from 62,000 products to 55,000 between mid-2010 and mid-2012.

Coles responded quickly with its own statement, claiming that the AFGC "has selectively used data from a Deloitte report to pursue a tired political campaign against the major supermarkets."

It adds, "Unfortunately, the AFGC have ignored the detailed Deloitte analysis about why and what has happened in Coles’ supermarkets and the Deloitte conclusion because it does not suit their story. The Deloitte report concludes: '…effective choice in the store is still high and consumers may be better off overall'".

Coles went on to add that branded products make up 75 percent of all products sold in its stores, and just as many private label products have been removed from shelves as branded products.

John Durkan, Coles merchandise director, said, "It is about time the AFGC became a more professional body that actually represents all of its members, many of whom have seen substantial sales gains from products sold at Coles that customers buy the most."

Click here to read more on this story.

 

New star rating system considered for food labelling

A new star rating system is being considered as a means of communicating the nutritional value of processed foods, following the industry's rejection of 'traffic light' labelling.

ABC's Lateline investigated the new labelling model earlier this week, claiming "A star system is now likely to be adopted by governments next year to help guide consumers in the fight against obesity."

The star system, which would be similar to that displayed on whitegoods in relation to energy efficiency, would see highly nutritious processed foods given more stars, while those foods lacking nutritional value will display fewer stars.

Michael Moore from the Public Health Association of Australia, suggested food manufacturers would prefer this model to the controversial (and subsequently rejected) traffic light model, which proposed colour-coding products based on their nutritional value.

"What they don't like is any form of negativity and red of course is a negative, and that's one of the reasons why I think they're prepared to look at the star system, because it implies the food's not good for you but it doesn't say it's bad for you," he told Lateline.

Jane Martin from The Obesity Coalition called on the industry to remove its Daily Intake Guide (DIG), now widely featured on the front of high volume products.

"We know from research that consumers find DIG very confusing and in the same vein we stepped away from traffic lights as our preferred option, we expect industry to do the same thing and move away from percent DIGs," she said.

The Australian Food and Grocery Council's chief executive, Gary Dawson, said it doesn't have to be an "either-or" situation and argued "It doesn't make much sense to take information away."

Dawson reinforced that the AFGC has made no commitment to the star system, which requires greater research and testing.

"It does need consumer testing. There's no point going down this path if in consumer testing it's found that it's not meaningful or that consumers don't understand it," he said.

Lateline stated that negotiations continue under the guidance of the federal Department of Health but industry and public health advocates hope that agreement on the star system will be ready for state and federal ministers early next year.

AFGC, however, has released a statement claiming that nothing will be presented to ministers until June 2013, once modelling, consumer testing and market research is completed.

See Lateline's report in full here.

 

Support grows for tax on unhealthy foods and ban on junk food ads

Australian consumers support a tax on unhealthy foods and many support bans on junk food advertising, despite the food industry claiming such measures would be wildly unpopular in the public arena.

The SMH today reported that more than two-thirds of 1500 primary grocery buyers surveyed are in favour of a tax, while 'traffic-light' labelling on all packaged foods also received strong support.

The government and food industry have to date both refused to implement these publically supported measures claiming ‘traffic-light’ labelling wouldn’t work and have instead asked a committee to put together a new labelling system that doesn’t include the ‘traffic-light’ idea.

Jane Martin, leader of the Cancer Council of Victoria study and a member of the committee told the SMH ''they've said there is not enough evidence for it, so we have been asked to instead create something with no evidence behind it whatsoever''.

Martin said that researchers were surprised nearly 90 per cent of respondents agreed food manufacturers should be forced to cut fat, sugar, and salt levels in processed foods.

''I was shocked at the high public support for regulation, yet that sentiment is not something that has come through so far in this debate,'' Martin said.

According to a survey of 1200 people conducted by the Australian National University on attitudes to food security, and reported by Food Magazine, more than 75 per cent of Australians support a ban on junk food advertising in children’s television, and almost 20 per cent support a total ban.

Timothy Gill, principal research fellow and scientific programs manager at the Boden Institute of Obesity, Nutrition and Exercise at the University of Sydney, said restricting junk food advertising is a way to give parents more support when it comes to combating childhood obesity.

“You only have to experience the trauma of trying to shop with young children in the supermarket, and being pulled every which way by a child demanding a particular food product that has been marketed to appeal to them,” Gill said.

In October, Food Magazine reported the introduction of the Australian Food and Grocery Council’s (AFGC) Responsible Marketing to Children Initiative (RMCI). The RMCI is a self regulation policy created to reduce the number of junk food ads aimed at children.

The policy was slammed by health experts when research conducted by the University of Sydney and the Cancer Council found the effectiveness of self-regulatory pledges by members show the industry has no credibility and has failed to protect children against obesity.

The researchers also highlighted that there are no incentives for food manufacturers to avoid targeting children and despite the introduction the RMCI and other self-regulation pledges in 2009, the frequency of junk food ads remained unchanged from last year.

The AFGC blamed a scheduling error after the number of junk food ads targeted at children last year actually increased rather then decreased.

Further changes to the voluntary industry codes, reported this week by Food means junk food will not be promoted during television programs that attract a child audience of at least 35 per cent, a reduction from the previous 50 per cent benchmark.

However critics say the restrictions do not go far enough and warn that children will still be hounded by unhealthy food ads, News.com reported.

Nestle, Mars, Campbell Arnott's, Coca-Cola, Kellogg's, McDonalds, and Hungry Jacks are all companies who support the industry's Responsible Children's Marketing Initiative.

"It does not go far enough to reduce exposure because it won't actually pick up programs that are watched by the greatest number of children overall," Martin said.

Earlier this year, Cristel Leemhuis from the AFGC said the industry needs to work towards improving obesity rates if it wants to avoid being forced to make changes.

“The food industry is definitely part of the solution, particularly when you look at overweight and obesity,” she told the Food Magazine Industry Leaders Summit.