As food producers suffer, Coles reports more growth

As farmers leave family farms because they can’t make enough money to survive and Australian food manufacturers continue to go bust because they can’t meet supermarket expectations, Coles has recorded a three per cent growth in sales.

Coles’ decision to slash the price of milk to $1 per litre in January 2010 has had enormous impacts on the farming industry, forcing them to sell up to 40 per cent of their milk, which costs 40 cents per litre to produce, at around 18 cents.

"The retail actions are certainly impacting the dairy farmers in a negative way, this combined with the uncertainties and other factors [impacting] dairy or other farming, it's making it unattractive for the next generation, because it's not profitable for my children,” Terry Toohey Australian Dairy Farmers Director, told the recent Food Magazine Industry Leaders Summit.

"If I was old and had children ready to take over the farm, I will tell them blue in the face not to come into agriculture. 

“And that's pretty sad after 107 years on the one farm."

“It’s an unfortunate reality that milk price is a dollar.

“[It’s] simply unsustainable for all involved in the fresh food market.

“You can see the dairy farmers’ dairy families already suffering for Coles’ tactics.

“Tthe sheer size of the supermarket duopoly, over 75 per cent of the market is between the two powers, and they are wielding that [power].”

The power of the supermarkets

Food manufacturers are struggling to stay afloat, as they compete with private label offerings from the supermarkets, which continue to dominate an increasing amount of shelf space, and unrealistic demands placed on them by the big two.

The Senate Inquiry into the supermarket powers struggled to get people to speak publically about the behaviours of Coles and Woolworths, something reporters, including Food Magazine, know all too well.

The Wesfarmers-owned Coles Supermarket group’s three per cent sales growth over the last quarter of the financial year ended 30 June 2012, placed them ahead of arch-rival Woolworths for sales for the twelfth straight quarter.

The real winners of price cuts

Ironically, while the discounting competition between the big two is the factor putting Australian food workers out of jobs and ruining once-viable farming operations, it is exactly this “value” that Wesfarmers managing director Richard Goyder attributed the growth to.

 “Coles achieved total food and liquor sales growth of 4.6 per cent for the year and comparable sales growth of 3.7 per cent,” he said.

“The result was driven by sustained strong volume growth during the year, which accelerated in the fourth quarter as ongoing investments in value, quality and service were positively received by customers.

“This was evidenced by improved customer numbers and increased basket size.”

Managing-director of Coles, Ian McLeod, also weighed in with some out-of-touch comments.

“We have been particularly pleased with the continued strong volume growth,” he said.

“This confirms that our determined efforts to provide better quality, service and value are being welcomed by Australian consumers during a period of sustained pressure on household budgets.”

For thousands of Australians out of work due factory closed as a direct result of the supermarket price wars, the strain on their household budgets has only worsened, and while Coles maintains it has the interest of everyday Australians at heart, it is exactly these people that are being forced out of jobs due to the retailers’ actions.

Is the produce industry next?

Coles also reported that it is improving relationships with local fruit and vegetable producers.

“We also deepened our relationship with Australian Growers by becoming the first Australian supermarket to offer 100 per cent Australian grown Coles branded frozen vegetables,” McLeod said.

Despite such declarations, the Australian produce industry is also suffering at the hands of the big two, and have previously admitted the cut-price fruit and vegetable offerings "has the making" of becoming the next milk price wars.

Do you buy Coles’ declarations that it is just working to deliver cheap prices to Aussie families? Or are you someone who has recently been put out of work by the supermarket powers?

Two weeks on, Coles warehouse workers accept deal

The blockade at the Coles warehouse in Melbourne has ended after two weeks, after staff accepted a new pay deal.

The protesters were fighting for better pay conditions and had not allowed any trucks in or out of the facility since the strike began, impacting supply to Coles stores.

The National Union of Workers (NUW) members accepted a 12 per cent pay rise over three years from the Toll Group, which manages the warehouse on behalf of Coles, yesterday.

Despite a court ruling that they stop the blockade, the workers vowed to continue last week and into this week, until yesterday when they decided the agreement was finally “much better” than what they had previously been offered.

But Tolls said the agreed upon deal is for the same amount as what they first offered, just distributed differently.

"The total value of Toll's offer has not changed over the past two weeks,” Toll corporate affairs manager Andrew Ethell said.

“It remains an effective 4 per cent annual wage rise over three years.

"Arriving at this final negotiated agreement has resulted in shuffling the structure of how wages and conditions will be allocated, effectively reducing some conditions in order to be able to increase others.

"It is a shame the illegal blockade that's been in place for the past two weeks has delayed a resolution being reached earlier."

NUW secretary Tim Kennedy said the workers voted to accept the deal because it dealt with the central issues the workers have been fighting for, including the ability to earn rostered days off (RDO’s), public holiday agreements and shift penalties.

In lieu of a shift penalty for workers rostered on between 2pm and 10pm, the workers have agreed on a family allowance payment  to be added to the deal.

"The union is very happy the workers, after a long two-week struggle, have been able to secure an agreement," he said. 

The union’s argument was centred on discrepancies in workplace agreements between the Sommerton warehouse and other Coles warehouses.

"There is no doubt, in order to make certain we won these conditions of equal treatment, there had to be some give and take," Kennedy said.

 

Fair Work to be brought in again to settle Coles warehouse dispute

The industrial umpire will again be brought in to deal with the controversial blockade by workers at a Coles warehouse in Melbourne, after they defied a court order last week and continued protesting.

Discussions continued over the weekend, after workers voted against an offer from the Toll Group, which manages the Sommerton site, on Friday.

The order handed down by the Victorian Supreme Court last week banned the National Union of Workers (NUW) and 25 individuals from continuing their action, which is preventing trucks entering or leaving the warehouse.

The initial order was handed down a week ago, and last Wednesday Justice Anne Ferguson extended the ban for a further seven days.

Barrister for the Toll Group, Stuart Wood SC, said it appeared one of the people named in the order was in contempt.

"The picket is still continuing, it has actually intensified," he told the court.

"There is a physical barrier across the entrance.

"There is evidence of some of the defendants still being involved."

According to Toll Group, management and staff tried entering the site on Wednesday morning, but were warned by police that it was not safe to proceed.

“Toll will not be taking any action at the union's blockade that endangers safety," Toll Group general manager of corporate affairs Andrew Ethell said in a statement.

The union said it had no control over the blockade, but also told the company they could arrange for some Toll people to access the site, Ethell alleged.

"The people blocking vehicles from entering the site are acting illegally, regardless of whether they have been named as part of a Supreme Court order or not," he said.

Suggestions that Coles would step in have also been quashed, with chief executive Ian McLeod saying the issues are not for the supermarket giant to resolve.

He said that while he is concerned that the blockade outside the site is continuing despite the court order.

"It is somewhat troubling when you've got … up to 200 people who actually want to go to work but have been denied the right to do so. I think that's concerning," McLeod told Fairfax radio on Thursday.

The NUW is calling for pay and entitlements to be increased for the site’s 600 workers to get them in line with other Coles workers.

It wants Coles to take part in enterprise bargaining agreement talks with Toll in a bid to break the stalemate.

But McLeod has ruled out a Coles intervention.

"That's not for us to decide,” he said.

“This is a dispute between Toll and their employees.”

Workers don’t want their jobs here: Simplot boss

The promise of receiving a sizeable redundancy payout is changing the scope of the working world, and according to Simplot boss Tom O’Brien, 20 per cent of his workers want processing plants to close for this reason.

As one of Australia’s largest food processors, Simplot works hard to stay afloat in the tough retail environment, but O’Brien has told Business Spectator and ABC News that the workers don’t even want to fight for the company and their jobs.

He believes big redundancy payouts are what is encouraging workers to stay in the one company, and that they are detrimental to the food processing industry in its current state.

"Every food manufacturer in Australia is getting ready to close plants in one form or another, it's just a matter of when," he said.

"We're getting no price increases whatsover, we've got the cost of non-tradeables growing rapidly in the market.

"The cost of power and water and everything else is just going up astronomically."

But John Short from the Australian Manufacturing Workers Union (AMWU), which represents the workers at Simplot’s Davenport and Ulverstone plants in Tasmania, has slammed O’Brien’s comments, arguing workers do want to keep their jobs.

"I think it's very disappointing. I don't know who he's talking to, but the people we talk to are very much dedicated and committed to the company," he said.

"They don't want to see the jobs lost there.

"When we talk to people, they're the opposite.

“They want permanent jobs."

Govt outlines plans to improve food industry

 

A new government report has defended foreign investment in prime Australian agricultural land, and argued that the only way forward for the country is to embrace the rising Asian middle class.

The green paper for the National Food Plan has forecasted a rise of almost 80 percent rise in demand for food by 2050 and believes Australia should embrace the opportunity.

The middle classes around the world will increase to almost 5 billion by 2050, 85 per cent of which will be in Asia.

Prime Minister Julia Gillard announced in May that Australia should gear towards becoming the ‘Asian foodbowl,” but farmers and agricultural experts slammed the suggestions, saying current regulation is hindering the industry rather than helping it.

There have also been calls for a public register of all investment in Australian farming land and companies, which were only spurred on by revelations in May that a company owned by the Chinese Communist Party wants to buy the entire Ord Expansion Development in the north of Australia.

But the government maintains that investment, foreign or otherwise, is crucial for Australia’s economy.

''Any reduction in foreign investment in the agricultural sector would likely result in lower food production with potentially higher food prices, lower employment, lower incomes in the sector and lower government revenue,'' the paper says.

The paper also acknowledges the confliction between farming and coal seam gas mining, and the importance of finding a compromise between them.

''The government is confident that mining and farming can co-exist without affecting Australia's food production capacity but recognises land use planning is a significant policy issue that must be considered carefully.''

It also suggests that a forum between the supermarkets and manufacturers needs to be established, to improve strained relationships cause by the supermarket duopoly.

And while the Australian Food and Grocery Council (AFGC) believes its Responsible Marketing to Children Initiative (RMCI) has been successful at reducing the number of advertisements for junk food directed at children, the report suggests these voluntary standards will have to be monitored by the government.

“The food industry is definitely part of the solution, particularly when you look at overweight and obesity, Cristel Leemhuis, Director, Preventative Health Policy Healthier Australia Commitment at the AFGC told the recent Food Magazine Leaders Summit.

“It’s not voluntarily, the consumer is demanding it.

“Consumers push these businesses, so they’re responding to that consumer demands.

“I’m a fan of minimum effective regulation if we do need it lets go down that track, but let’s see what we can do without the regulation to start with.

“Can we actually address the issue without regulation?

“That’s the path we should take first.

“If that doesn’t work then we should step into these other areas, but we really need to try this other area first before we just straight down to [regulation].”

Private Label will damage our business: Four ‘N’ Twenty pie maker

The supermarket price wars have had many victims, and the latest to be impacted by the ruthless competition that is squeezing food companies out of business is iconic Aussie pie maker Four ‘N’ Twenty.

Yesterday the makers of Four ‘N’ Twenty pies, Patties Foods, which also manufactures Herbert Adams and Nanna’s brands, said the increase in private label will hurt its business, mostly likely beginning this year.

The pie maker predicts that in the second half of 2012, it will face much tougher trading conditions, as private label offering from Woolworths and Coles increase in numbers, pushing established brands off the shelves.

Both supermarkets have confirmed plans to rapidly increase private label products in the coming years, and as they do so, other manufacturers are seeing their products moved from prime positions on shelves, and disappearing altogether.

Very few manufacturers will speak on the record about the impact of the supermarket price wars, for fear their deletion from shelves will be speeded up if they do.

Even the Senate Inquiry investigating the power of the big two struggled to get people to speak, which is indicative of the power they wield over manufacturers and suppliers.

The few who will speak either speak out anonymously, or once they can no longer be punished, as was the case with the exiting chief executive of the Wine Federation Australia, Stephen Strachan, criticised the supermarkets’ power only when he had stepped down from the post.

''If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry,'' Strachan said.

''Whenever I've made comments in the press, I could only talk about retailers in a generic sense, but they [Coles and Woolworths] would religiously follow up on those comments and make it known they were displeased.”

The recent Food Magazine Leaders Summit also came up against the same issues.

We invited food manufacturers and other food companies to participate in the day, aimed to identify the main issues in the industry and work towards improvement, but when it became known that the impact of the supermarket dominance would be discussed on the day, dozens refused to come, for fear of the retributions of being associated with anything discussing such issues.

Despite the pressure from the supermarkets, Patties has managed to continue to grow, mainly due to other more traditional pie outlets.

The company expects the 2012 financial year will deliver a net profit of between $19.2 million and $19.7 million, up from $18.4 in 2011.

Second-half net profit will almost definitely remain the same as the same period last year, however, showing the beginning of a decline in profits.

When Patties Foods released its 2012 first-half results it expected that, despite the difficult conditions, it was still expecting improved profits for the second half.

"The second half saw increasing pressure on margins in the In Home (supermarket) channel, particularly with the continued growth of private label products,” Patties said in a statement to the Australian Stock Exchange (ASX).

Managing director Greg Bourke said the company has been working hard on driving strong sales growth, and has increased manufacturing efficiencies maintained tight control over costs to achieve its results.

UK govt spending £5 million on improving dairy industry

UK Prime Minister David Cameron has announced that the government will spend £5 million (AU$7.6 million) on a program to improve competitiveness for dairy farmers.

The funding is part of the UK Government’s Rural Economy Scheme, and the announcement came on the same day as dairy farmers across the UK gathered at a summit in London, calling on  processors to reverse a reduction in farmgate milk prices.

The Department for Environment & Rural Affairs (Defra) will hear bids for funding in the coming months, but have not revealed exactly what they will be looking for.

"We are looking for high-quality bids from the dairy industry to help unlock growth through game-changing investments," a Defra statement said.

"The dairy grant funding is to help producers to increase their competitiveness and added value.

“The details regarding what it is available for support, intervention rates etc are not yet available, but will need to meet current RDPE (Rural Development Programme for England) funding requirements.

The dairy farming industry has suffered similar problems as their Australian counterparts, as cuts to base prices impact farmers’ incomes and businesses.

Coles’ decision to slash milk prices to $1 per litre last year had huge flow-on effects for the industry, and farmers left the industry in droves.

Last month, the dairy industry announced that name-brand milk, which is slightly more expensive than the private label offerings, will now be permeate free.

The additive, which is much cheaper than whole milk, dilutes the milk and allows it to be sold cheaper, but as consumers become aware of the presence of permeate, they are looking for products without it.

The move by the dairy industry provides an obvious point-of-difference for consumers, which it hopes will result in more sales of the additive-free milk.

In May Dairy Australia received $1 million from the Federal Government to conduct research to assess energy efficiency on dairy farms nation-wide, but do you think the Australian dairy industry needs a similar scheme to the UK?

Image: The Guardian

Supreme Court expected to enforce end to Coles Warehouse strike

Despite predictions that striking workers at the Coles factory in Melbourne will lose their legal battle today, they have pledged to continue their industrial action.

After the 600 striking workers at the Sommerton factory won the right from Fair Work Australia to continue picketing on Friday, management of the warehouse then applied on Saturday for an emergency injunction to end the strike.

Toll Group lawyer Stuart Wood said the 600 striking workers need to be stopped to allow the 150 workers who want to go back to work, to do so.

'There are real-life individuals whose livelihoods are being impacted by the picket,' he told the court.

'It is having a deleterious impact on employees who wish to cross the picket and work at the Somerton site.'

The Toll Group have told the Victorian Supreme Court that stopping the strike by National Union of Workers (NUW) members is urgent because they have blocked trucks from entering or exiting the Somerton warehouse since Tuesday.

The matter was adjourned until today when union lawyers failed to appear in court.

They were not present because they had not been properly served with legal documents, which Wood said was a deliberate action intended to create significant tactical advantage by extending the blockade until today.

NUW state secretary Tim Kennedy told reporters at the picket line yesterday, that he is expecting the Supreme Court rule in favour of Toll’s application.

He said workers will continue to strike regardless.

The workers are calling for better pay and conditions.

Striking Coles workers reject offer, Fair Work expected to be called in

The dispute between workers at a Coles warehouse in Melbourne and their employer continues to escalate, with workers rejecting an offer from the company yesterday and expectations it will reach the industrial umpire today.

The strike began on Tuesday, over what workers say are conditions inferior to those at other Coles warehouses, and their decision to block trucks entering the site led to predictions that the action would soon impact Coles consumers.

The Toll Group, which manages the 600 staff at the Somerton warehouse on behalf of Coles, offered a boost of 0.5 per cent to workers' annual pay increases, bringing it to 4 per cent.

Other entitlements previously put forward, including payment of shift loading on annual leave, and the ability to earn rostered day’s off (RDO’s) were left out of the company’s offer, according to National Union of Workers (NUW) Victorian secretary, Tim Kennedy.

It is expected that the Toll Group will make an application to Fair Work Australia at 10:30 this morning to lift the picket, Kennedy said.

"The purpose of the application is to try and remove the picket," he told AAP.

But the union will contest the action, arguing that the industrial action is legal and peaceful.

"We believe and we're confident what we're doing out at Somerton is legal and within the bounds of protected action, and that it is safe and peaceful," he said.

"We feel we're on very strong grounds to defend that application."

He said the workers will continue to strike until they get the response they need from Coles.

"We prefer to be sitting down with Coles and Toll management to resolve the dispute rather than having these technical arguments" he said.

Coles warehouse strike to impact supply

As a strike at a Coles warehouse enters its second day, experts have warned the impact will take less than a week to impact supply to supermarkets.

About 600 workers are striking at the Somerton warehouse in Melbourne’s north, calling for improvements to working conditions including shift lengths and the accumulating rostered days off (RDO’s).

The workers say their working conditions are worse than those at all other Coles warehouses.

Victorian supermarkets will start to see a decrease in the availability of products including toilet paper, beer and toothpaste.

"I think you will see an impact at about the six-day mark, there could be empty shelves," National Union of Workers state secretary Tim Kennedy told the Herald Sun 

"If they do run out of beer then they will probably start talking to us."

Imported beer brands including Heinekin, Corona and Becks could be affected, he said.

Coles, which has stood down hundreds of workers at the distribution centre, argues that the action is unlawful, and has lodged an application with Fair Work Australia this morning, The Age reports.

The supply impact of the strike will spread, Coles predicts in its application.

"The company believes that industrial action will spread to all three sites," Coles said in the application.

Coles has apparently spent millions of dollars on trying to lessen the impact of the strike by sending products to other warehouses, but workers at the Somerton warehouse say they are determined to continue the action until they get a response.

"Most consumers will not take the risk to go to a Coles supermarket now in the belief that things may not be there," Kennedy told reporters at the warehouse.

"They'll probably go to the competition, so it will have a significant effect on sales for Coles."

Workers began their strike outside the plant at 6am Tuesday and braved the rain and freezing conditions last night to continue their fight.

The union said it was set to speak with Toll management which manages workforce issues at the site later on Tuesday.

Christopher Whitefield , spokesman for Toll Management, which manages workforce issues at the site, said the company had offered a four per cent pay rise, which is higher than similar work sites.

"In order to keep attracting and retaining the best people, Toll will continue to balance the needs of the business to remain competitive within the industry," Whitefield said in a statement.

What do you think of the workers' strike? Is impacting the supply to stores the only way to get the attention they need?

We source most of our fresh produce locally: Woolworths

Woolworths has unveiled a new advertising campaign, intended to inform consumers that contrary to widely-held opinion, it actually sources 96 per cent of its fresh produce from Australia.

Most consumers believe half or less of fresh meat sold in Australian supermarkets is locally grown, but Woolworths says all of it is.

Consumers are also increasingly aware of the freshness of products by the time it gets to their shopping trolley.

"There is little doubt that supermarkets can be doing a better job in informing customers about who we are and how we are able to deliver the best fresh food in the country,” managing director of Woolworths supermarket and petrol division, Tjeerd Jegen said.

“That's why Woolworths is embarking on a multi-million dollar brand and consumer awareness campaign.

"As Australia's iconic fresh food retailer we are reaching out to customers. We have a responsibility as Australia's largest national supermarket to better explain to customers where their food comes from and to improve their shopping experience."

The slight change to Woolworths’ Fresh Food People slogan is sure to be met with some scepticism though, as produce growers still struggle to make ends meet.

The new advertising and branding campaign marks "a fresh promise to our customers" to be 'Australia's fresh food people,’ the company said.

 

Mixed opinions from farmers over Coles’ boutique food plan

Victorian Farmers have criticised a plan by Coles to sell boutique food brands in regional stores, but the representative body for Western Australian farmers has welcomed the idea.

The Victorian Farmers Federation said suppliers will continue to struggle against the major supermarkets, who are able to offer extremely low prices due to their size and, according to industry sources, through their bullying behviour.

Earlier this week, Master Grocers Australia slammed Coles and Woolworths for swooping into small regional centres with stores that are too big for the population, in a bid to wipe out the independents.

But now, the Western Australian Farmers Federation (WAFF) president Dale Park has welcomed the idea, but only if their products are not sold at a higher price than others on offer.

"It's not Coles who are making the final decision on this, it's the people who are actually buying the products from Coles who are making the final decision," he said.

"If the products from Coles are too expensive, people won't buy them and there won't be a market."

"The trick then is to make sure that you can get enough for your product to keep producing it, as I've said more than once the most important people in the whole line of food are the people who produce it in the first place and the people who eat it in the last place," he said.

Family farms won’t survive and it’s not all Coles and Woollies fault: AIP National Conference

The 2012 Australian Institute of Packaging (AIP) Conference has kicked of in Queensland, and food and packaging experts have already shared their thoughts on the future of the Australian industry.

Tom Schneider, President of the World Packaging Organisation began his address to the audience by saying Australians are “very much like Texans, you meet people well and you enjoy people.”

Terry O’Brien, Managing Director, Simplot had some more controversial comments on the state of the industry and what producers and companies need to dot o stay afloat.

“People keep saying things like ‘If we could just legislate against Coles and Woolworths and stop them bullying companies,  it would fix everything.,’ but I don’t think that’s necessarily true.

These retailers take roughly 33 per cent of profit out of the chain; globally, the level is about 25 per cent, so it is higher.

“Woolworths is the second highest profit margin maker behind Walmart.

“The fact that Woolworths is so successful isn’t a fluke, they have worked hard over a number of years and they aren’t stopping.

“And they’re looking for further profit.”

O’Brien shared his view that the rapidly changing food and packaging supply industries will continue to push producers and manufacturers to innovate and improve their business models.

“The press has had a lot of fun with the retailers and the food industry taking shots at each other over these kinds of statistics, rather than getting them together at a table to discuss the issues.

"The AFGC [Australian Food and Grocery Council] has started doing that and some kind of truce has been called.

“There is a responsibility for Coles and Woollies, given their size, for them to respect suppliers.

“When they make decisions to D-list people, they have to understand the impact of that. 

“I think they do understand, but they have to communicate those through the organisation. 

“They’re not the pseudo protectors for companies in Australia, so if you’re  sitting in a company that’s not looking bright, and is not innovating, the future is not bright for you in Australia.

When questioned about yesterday’s news that Woolworths chief Grant O’Brien has extended an olive branch to manufacturers and suppliers to develop an independent body to oversee dialogue between the major supermarkets and suppliers, O’Brien (Terry, who assures there is no family connection) was cautiously optimistic.

“Things are usually settled much better sitting around table than in all out warfare,” he said.

“How far and how deep into issues they would go, I don’t know.

“What he has offered so far is not going to the heart of the issues we have, so we need more discussions about that.”

He said not everything can be blamed on the major supermarkets, and that companies and suppliers cannot expect to continue doing business exactly ads they have done for decades.

“You have to make yourself a corporation rather than a family farm system,” he said.

“I love farmers, I spend a lot of time with them and I wish the model could stay where it is to make money, but unfortunately that won’t be the case.

“Regional areas are going to suffer.”

“No matter which way you cut it, we’re too expensive.

“There’s been a lot of talk about cheap imports, but when I’ve travelled the world, I’ve found that is the normal price, and we pay too much.

“It just costs too much to produce things in Australia, and it comes down to our standard of living.

“We expect to be able to support the standard of living we have, people are widespread geographically and people demand wage increases and things like that.

“But nobody tries to be better than average because average gets them paid.

“We have to be very efficient, and chase constant productivity improvements.”

O’Brien said the increased union activity of late is not beneficial to the industry, nor is the changed attitude to redundancies and retirement.

“The re-energised union movement in Australia is not helping,” he said.

“I’ve always been a supporter of unions, but I’m really pissed off with them now and I think they’re chasing people offshore now.

“And redundancies are just such a big nest egg, people now would love to walk out the door at retirement with a redundancy payment.

“How do you unwind this sort of thing?

Coles and Woollies wiping out regional grocers: lobby group

The Senate Inquiry into Coles and Woolworths’ anti-competitive behaviour is not impacting their mission to take over the grocery sector entirely, and the independents are desperately calling on the federal government to step in.

The independents are banding together to create a lobby campaign group over plans for the big two to increase floor space by over 5 per cent in the next few years.

Coles and Woolworths have undertaken research and development over the last few years which has seen them close dozens of stores and reopen them in other areas.

These areas, the independents say, are usually where they are located.

A local IGA or smaller grocer is then pushed out of business as they find it impossible to compete with the ridiculously low prices the major supermarkets can achieve through their anti-competitive and bullying behaviour.

The Senate Inquiry into the actions of Coles and Woolworths is struggling to get people who will comment on the behaviour of the big two, while factories continue to close and more private label products spring up on shelves.

Last week, Steven Strachan, the outgoing chief executive of the Australian Winemakers Federation, who would only speak once he had left the position, for fear of the consequences if he spoke out earlier, said the major supermarkets are bullying the winemakers too.

''If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry,'' Strachan said

''Whenever I've made comments in the press, I could only talk about retailers in a generic sense, but they [Coles and Woolworths] would religiously follow up on those comments and make it known they were displeased.

The pressure placed on food producers is well-known to everyone in the industry – Food Magazine has spoken to countless manufacturers about the pressures placed on them by Coles and Woolworths, but none will speak on the record – and they have even been accused of contributing to road deaths with unrealistic delivery demands.

A Commonwealth Bank assessment of Woolworths' $1-billion-a-year growth plan, which will see it swoop into more regional centres, including West Dubbo, Ulladulla and Morriset, found the huge supermarkets being developed are too big for the areas.

''Many of the Woolworths developments have been in areas with marginal medium-term economics for supermarkets,'' the Commonwealth Bank analysis said.

''We are concerned that in addition to the poor lending conditions, Woolworths is not helping itself by developing marginal sites.''

The report questioned Woolworths’ ''exceptionally high'' forecast floorspace growth of 3 per cent a year.

Master Grocers Australia, which lobbies on behalf of independents IGA and Foodworks, will use the bank assessment to support its claim that the big two are opening bigger stores than necessary to wipe out the competition.

''Master Grocers Australia believes the strategy is conscious, deliberate and intended to bring about a substantial lessening of competition in those local markets where over-large stores are developed,'' a draft report said, according to The Age.

Master Grocers will use the findings to lobby the federal government and Australian Consumer and Competition Commission (ACCC), calling for more action to stop the inundation of Coles and Woolworths’ around the country.

It wants MPs and the ACCC to use their powers to probably investigate and assess the profitability of such stores, push for mandatory competition and net community benefit tests in planning stages prior to approval and also legislate that prior notice of proposed property acquisitions by the major chains must be provided.

Coles spokesman Jon Church told The Sydney Morning Herald the claims are ''nice conspiracy theory with no basis in fact''.

''We only open stores where there is a consumer need and we believe we can make a return on our investment,'' he said.

And it’s not just the grocery market the big two are wiping out, they also plan to bring the liquor, hardware, office supplies and gaming, arms of their businesses to “marginal” areas.  

''The effect is the elimination of competition in these local markets,'' the report said.

Master Grocers has identified a number of stores which it says are “oversized,” including a 2383 metre square Woolworths store and liquor outlet in Bright, which has a population of 2100.

There is also a proposed 3100 metre square Woolworths store in Seville, where the population is 1800 and a 2600 square metre store which has opened in Koo Wee Rup, where there is only 2803 people living.

Woolworths spokeswoman Clare Buchanan told The Sydney Morning Herald that the company's competitors would not know the potential profitability of individual stores, but she did admit the company looks to open new stores in growth areas

''Developers look to incorporate amenities such as supermarkets in order to attract people to live in an area,” she said.

“This means we commit to a long-term investment in the future growth potential of a suburb.''

Here at Food Magazine, we've been asking whether we need a Royal Commission into the behaviour of the major supermarkets. Do you think it's come to that?

Farmers to receive up to $15 000 for sustainable projects

A joint project between Landcare Australia and Woolworths will award up to $15 000 for individual farms or organisations to support projects improving water use, the carbon footprint of farming or nutrient management.

In a bid to encourage, develop and improve sustainable farming practises throughout Australia, the project has made $150 000 available, which will be awarded to projects that best fit the criteria.

Pat McEntee, Woolworths General Manager Fresh Food, said the project is an important investment into the future of the Australian agriculture sector.

“As Woolworths continues to invest in Australian farmers, the Fresh Food Future open grants program provides farming groups and organisations with a great opportunity to support and develop new ways to increase the sustainability of their operations,” he said.

According to chief executive of Landcare Australia, Heather Campbell, the innovation in the farming industry is often overlooked, and this project plans to reward some of the new ideas Australian farmers are coming up with all the time.

 “Having seen the incredibly innovative projects funded through the Woolworths Fresh Food Future open grants program last year, I am delighted that we can continue to support the sustainable agriculture sector in this way and cannot wait to see what other fantastic projects come our way through this year’s program,” she said.

The Australian farming industry has had a rough trot of it lately, with the average farmer aged over 60, and nowhere near enough new workers coming through the ranks to fill the void left when they retire.

Children in Australia even think that yoghurt grows on trees and cotton socks are an animal product, a report buy the Australia Council of Educational Research found, and agriculture degrees across the country are being discontinued as enrolment numbers continue to dwindle.

Dairy farming has been deemed the second worst job, based on physical demands, work environment, income, stress and hiring outlook, and farmers are leaving the industry in droves as they struggle to make ends meet in the supermarket milk price wars.

How much extra support do you think the farming industry needs? Do Aussie children need better education about faming?

 

Reliance on transported foods could leave entire towns starving: govt report

A new report from the federal government has found that Australia’s growing reliance on foods transported long distances could be deadly in the case of natural disasters or other crises.

The Resilience in the Australian Food Supply Chain report, by the Department of Agriculture, found that the increasing dependence on perishables including milk and produce being transported thousands of kilometres would spell disaster, particularly for smaller towns, if a disaster occurred.

''The key question is whether, following a natural disaster or other major disruptive event, Australians in affected regions would go hungry,” the report says.

“The risk that this could happen is growing, especially if separate events in Australia's eastern states were to coincide.”

Over 75,000 truck trips are conducted each week across Australia to deliver more than 40 million cases of food, which is then sold from about 80,000 retail outlets including supermarkets, shops and restaurants.

Late last month the Transport Workers Union (TWU) accused Coles and Woolworths of contributing to road deaths by placing unrealistic demands on truck drivers, and the DAFF report also pointed to the increasingly complicated distribution networks created by the supermarkets as a contributing factor in the potentially dangerous situation.

''Longer supply chains expose transport routes to more points of potential vulnerability from such events as flood, fire and earthquake,'' the report states.

The Queensland floods in late 2010 and early 2011 highlighted some of the major issues with the current supply chain, with Rockhampton cut off by road, rail and air for more than two weeks and Brisbane coming within one day of running out of bread completely.

While nobody starved during the floods, it did highlight the potential risk of larger disasters, or more than one occurring at the same time.

If the Queensland floods had occurred at the same time as the bushfires of 2009, it would have been impossible for food to be delivered to far north Queensland, the report found.

As global warming increases, weather extremities increase and it becomes almost impossible to predict seasons, the possibility of two such disasters occurring simultaneously, or close enough to, is not unrealistic.

''If we had multiple emergency experiences happening around the same time – flood in Queensland, fire events in Victoria and another event in, say, South Australia – then the national system would struggle.,” Department of Agriculture Assistant Secretary Allen Grant told the current Senate inquiry into food processing.

Last week it was revealed the one in four products currently sold in Australia’s major supermarkets is private label and of those, one in two is imported.

The reliance on imports and lower quality foods to reduce costs in the cut-throat supermarket price war has led to countless Australian farmers, growers, processors and manufacturers being pushed out of work, but the current Senate Inquiry is struggling to get anyone to publically criticise the big two, for fear of punishment.

The departing chief executive of the Winemakers Federation of Australia, who would only speak out because he was leaving the representative body, came out swinging over the weekend, saying the supermarkets are also bullying winemakers, as well as food producers.

Coles and Woollies are bullying winemakers too: departing Winemakers’ Federation chief

Amid accusations that Coles and Woolworths are intimidating food manufacturers and produce growers so much they are too scared to even speak up at a Senate Inquiry, a leading Australian wine body has publically criticised the big two.

The anti-competitive and bullying behaviours of Coles and Woolworths are well known, and while countless food producers have discussed the damaging impacts of the supermarket duopoly on business with Food Magazine and other media outlets, almost all are too afraid to go on the record with their stories.

After it publically slammed the control the two supermarkets have on business more than once last year, Heinz declared on Friday that the relationships have improved significantly.

The comments come after a Heinz spokesperson told Food Magazine earlier this year that they were “trying to distance ourselves,” from the much-publicised criticism, which included  chief financial officer and executive vice president, Arthur Winkleback labelling the Australian supermarket environment “inhospitable.”

Now it’s the winemakers turn to publically oppose the behaviours of the major supermarkets, while everyone waits with bated breath to see if and how Coles and Woolworths will also punish them.

The supermarkets’ have both been accused of creating a culture of fear and intimidation among local wine producers, just as they have done in the food sector.

Stephen Strachan, who finished his role as the chief executive of the Winemakers’ Federation of Australia on Friday, would only speak to The Sun-Herald after his position had ended, which is inductive of the silo of silence in the industry.

''If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry,'' Strachan said.

''Whenever I've made comments in the press, I could only talk about retailers in a generic sense, but they [Coles and Woolworths] would religiously follow up on those comments and make it known they were displeased.

According to Strachan, the bullying is not only felt by local winemakers and Coles and Woolworths also flexes its power over foreign suppliers.

Furthermore, he said, they also collect sensitive commercial information from wine producers, and use that information to bully rival suppliers into selling for lower prices during negotiations.

Food Magazine has contacted both Woolworths and Coles for comment on the accusations, but neither has responded at this stage.

 

As supermarket power rises, Heinz praises progress

One of the few companies to be openly critical of the supermarket duopoly in Australia, HJ Heinz, has apparently mended fences with Coles and Woolworths.

Amid a climate of fear and bullying behaviour by the major supermarkets, where even a Senate Inquiry is struggling to get companies to speak up, HJ Heinz’ head of Asia-Pacific, Christopher J Warmoth has discussed the improved relationships.

''In the past eight months, we've seen a stabilisation of this business and that comes down to three elements," he said.

“First, we've improved our relationship with the retailers and they have told us that they have noticed our increased ability to bring them real value,'' he said.

These positive comments come after the company’s chief financial officer and executive vice president, Arthur Winkleback told US analysts in August last year that the demise of many Australian companies can be attributed to the supermarket war and said they have created an “inhospitable environment” for manufacturers.

Then in November its executive chairman, chief executive and president, William Johnston, told investors the company has had to overhaul its business strategy in Australia to deal with the supermarket dominance of Coles and Woolworths.

The comments came amid an announcement by Heinz that it would be closing three manufacturing facilities in Australia meaning more than 300 local jobs would go.

But the food giant has since tried to distance itself from those statements, which earlier this year a spokesperson told Food Magazine had been taken out of context.

The Australian food manufacturing sector is struggling to survive the supermarket price wars, which are driving profits up, pushing products off shelves in favour of supermarkets’ private label alternatives and, according to the Transport Workers Union, killing people on the roads.

One in every four grocery items now sold in Australian supermarkets is private label and of those, about one in two is imported.

Staying on the good sides of Coles and Woolworths is a good business plan in itself, as failure to do so can spell the end of a business.

Countless producers and manufactures have shared their struggles with Food Magazine, but refuse to go on the record with their stories for fear that being critical of the major supermarkets would be suicide.

Australia is one of Heinz’s biggest markets, bringing in an estimated $1 billion last year.

In contrast to the comments made and financial hardship experienced by Heinz last year, Warmoth now says the company is doing well.

''Australia has also reduced cost on every front,” he said.

“We have five factories, we closed one and have downsized three.

“We had a record year by far on the supply chain productivity.

''Now we are not where we want to be in Australia, but we've made significant progress and we enter [next financial year] with a much stronger foundation.''

What do you make of the latest comments from Heinz? Do you think they’re sincere?

Australian food packaging not shelf friendly

More than 70 packaging technologists, engineers and designers came together across three states in one week to look at ways to improve Shelf Friendly Packaging (SFP).

Supported by Woolworths, the Australian Institute of Packaging (AIP) and retail anylists IGD, the in-store training aimed to understand what is currently working on supermarket shelves and how improvements can be made to improve design, functionality, accessibility and appearance on shelves.

James Tupper, ECR Learning & Change Manager, IGD, travelled from the United Kingdom to run the 2012 AIP/IGD hands-on training which was designed to focus on the last 50 metres of the SFP supply chain.

It provided packaging technologists, SFP designers and manufacturers the opportunity to work hands-on in-store and understand the complexities and difficulties that poor SFP design causes for store fillers and staff.

The training allowed the attendees the opportunity to participate in three practical exercises in-store that showed what SFP works, which doesn’t and why.

Attendees soon realised that tape over perforations, poor gluing of boxes, perforations that don’t open, no finger holes, poor design and identification of front edges and poor quality corrugate are just some of the reasons why SFP is not used in-store.

“At the end of the day much of the Shelf Friendly Packaging in Australia is not fit-for-purpose and needs to be redesigned,” one attendee said.

How do you think packaging in Australia needs to be changed to make it shelf friendly?

Where does the food sold in Australian supermarkets really come from?

One in every four grocery items now sold in Australian supermarkets is private label and of those, about one in two is imported.

The Age has conducted an investigation into the state of the supermarket sector, and the results would not surprise anyone in the Australian food manufacturing sector.

It found the rate of imported food products is increasing at a rapid pace, as the only way for the companies to provide their ridiculously low prices is to buy food produced in countries by cheap labour.

South Africa and Thailand, two countries notorious for lacking in workers’ rights and having extremely low wages, are two of the markets commonly used by the cheap food retailers in Australia.

Researchers from the Australian National University embarked on a mission to follow the supply chain of many private-label products sold in Australia, which found them in South African fruit processing factories and canned pineapple facilities in Thailand.

"One of the canneries made private-label products for over 100 supermarkets," researcher Libby Hattersley, who inspected the South African businesses, told The Age.

"They just slap the retailers' label on it and send it out to them."

Differing food safety laws a risk for consumers

While the ethical issues involved with sourcing food from such countries are becoming increasingly important to consumers, there are various other issues involved with these systems.

“[No Australian food manufacturers] can survive in this environment, most places I’m going, they’re even competing with their own plants in other countries, if the Malaysian or Chinese plant is going better, they have to compete,” Jennifer Dowell, National Secretary of the Food and Confectionary division of the Australian Manufacturers Workers Union (AMWU) told Food Magazine earlier this year.

“The problem with that is that people aren’t comparing like with like.

“We produce food to a very high level and what is being imported from overseas needs to be the same quality.

“There needs to be more regulation and better testing for what comes into our country.

“If food is imported from a high risk site, like China, that will undergo testing, but not if it’s from New Zealand.

“The way the import laws work in New Zealand mean that they can import a product from China, put it in a bag in New Zealand and ship it to Australia as a ‘product of New Zealand.’

“If we try to export to other countries we face huge barriers, but we have removed all the barriers for others getting food into our country.”

The issues with the Senate Inquiry

Dowell was heavily involved in the Senate Inquiry into the supermarket duopoly in Australia, which was set up to investigate the anti-competitive practices and bullying behaviour of the major supermarkets, which are pushing Australian companies out of business.

But ironically, or tragically, the proof was in the imported pudding, as the Inquiry struggled to convince manufacturers to speak up, as they were terrified of the repercussions, including being relegated to a lower shelf, incurring more fees or removed from the shelf altogether.

Australian food producer Dick Smith said the blame lands at the feet of supermarkets ALDI and Costco, who rely entirely on imported goods, when he fronted the Inquiry earlier this month.

He believes the other supermarkets embarked on a game of catch-up, which has led to the current situation.

Australian made: are people really willing to pay more?

In April, Smith joined a number of local food and beverage producers, including Glen Cooper, chairman of Australia’s largest beer brewer, in  calling for a dedicated “Australian made” aisle in supermarkets to make it easier for consumers to choose locally made products and keep local businesses afloat.

Cooper believes laws which force supermarkets to set aside a minimum quota of floor space for locally-made food would be one way to slow the flood of cheap imports and prevent some manufacturers from tricking consumers into buying products they think are made in Australia, but are in fact made primarily from imported products.

"It's not realistic for busy shoppers to read every label to see its country of origin before you put it in your trolley," Cooper told Channel 7's Out Of The Blue program.

"So I think they [supermarkets] should be forced to have a certain amount of locally grown content and that it should appear in a clearly defined area designated for Australian-made products only.

While most Australians say they would prefer to buy Australian made, even if it comes at a higher price – indeed, at last check, a poll on The Age’s website showed 80 per cent said they would pay more for locally produced foods – the realities of the current economic climate are seeing more shoppers buying primarily on cost.

Coles and Woolworths maintain that they endeavour to source the majority of their food products from Australia, but one in two products in the Woolworths Select brand is imported.

It’s premium brand, Macro, has 85 per cent Australian products.

Coles will not release a figure on the percentage of its private label products that are sources locally, but The Age reports a source with connections to the business said it imports about one third of its own brand products.

The supermarkets like to toot their own horn when they do make a local supply deal, and blame it on a lack of Australian interest when they source from foreign markets.

"You'd be surprised how many times we get no one responding in Australia to our invitations to supply," Woolworths head of own brand Gordon Duncan told The Age.

It is notoriously difficult to get any Australian food manufacturers to speak on the record about the struggles, as they fear punishment from Coles and Woolworths, but Food Magazine is aware of numerous companies who are unable to supply to them due to their unrealistic demands.

Indeed, earlier this month Transport Worker Union (TWU) accused the major supermarkets of contributing to road deaths as they place unrealistic expectations on suppliers and drivers.

Coles recent deal with Simplot, the only remaining Australian-based frozen food processor,  to supply its house-brand vegetables, will apparently be so good for the industry they won’t even be able to grow the amount needed to supply both major supermarkets, according to Duncan.

The peak representative body, AusVeg, has labelled this “nonsense.”

Considering that in the last two years, fruit and vegetable exports have declined $200 million to $497 million, Coles’ comments are very optimistic.

Earlier this month the second Queensland tomato processor to go into administration this year left 40 employees out of work.

Bundaberg tomato farm, Basacar Produce went into voluntary administration, following in the footsteps of the nearby SP Exports, which collapsed in February, blaming the high Australian dollar and the supermarket price wars.

The SP Exports farm was the biggest in Australia before it collapsed, leaving hundreds of people unemployed.

While the Simplot-Coles deal is being touted as positive for the produce industry, it could mark the beginning of issues for the frozen vegetable industry that have plagued fresh produce suppliers for some time.

With the dairy industry still reeling, Coles slashed the price of produce in half in February and AusVeg spokesperson Simon Coburn told Food Magazine it “had the making” of the milk price wars.

“Long term this could deliver lots of damage to the industry,” he told Food Magazine.

“Depending where the reduced retail price is going to be absorbed, whether it’s a small grower or a big business, this will damage them long term.

“Eventually it will come back to growers and that’s where they’ll get into trouble.

“These prices aren’t sustainable if they’re passed onto growers, small operations and even big ones won’t survive this.

How do you feel about buying imported versus local products? Do you think we need a Royal Commission into the state of the supermarket duopoly?