Kelly
08-03-2011, 06:05 AM
Australia's supermarket price war won't be confined to door busting discounts on milk, meat, bread and eggs don't be surprised if the big retailers establish low cost food warehousing sites overseas, or even their own farms.
Woolworths and Coles already extend their activities well beyond mainstream groceries to include hotels, bottle shops, electronics and variety stores and petrol stations.
Their parent companies also own hardware, coal mining and insurance interests.
"Given their track record, nothing these guys might do surprises me any more, not even overseas farms or house brand packaging centres are out of their grab," said United Retail Federation (URF) national president, Scott Driscoll.
"They already have poker machines, they want to get into optometry and pharmacy, what's to stop them importing from their own farms in certain parts of the world or running off shore packing sites for house brand produce?" Mr Driscoll asked.
Woolworths and Coles own about 80 per cent of all Australian supermarkets, well ahead of the market share enjoyed by comparable joint market leaders in Britain, Tesco and Sainsburys (48pc) of the US Wal Mart and Kroger (20pc).
The local supermarket duopoly achieved sales totalling about $40.1billion in the first half of this financial year and on average capture about 24 cents in every retail dollar spent in Australia.
Returns to farmers from supermarket food sales are as little as five per cent according to the National Farmers Federation (NFF).
NFF president, Jock Laurie, is demanding the Australian Consumer and Competition Commission (ACCC) to "sit up and take notice" about the pressure local producers are under to deliver cheap food at "first world" production standards, while being benchmarked against products grown overseas where fewer quality assurance standards, farm safety and environmental considerations apply.
"The Australian public has to give some serious thought to the expectations and direction of our food retailing industry before it gets far too late for some of our agricultural sectors," Mr Laurie said.
At the URF Mr Driscoll, who represents independent grocery operators like corner shops, service stations and IGA supermarkets, said he did not believe Coles had cut its milk or bread prices to benefit consumers "it's all about wiping out other retailing competitors".
"If Coles succeeds in buying still more market share by using cheap generic brands, the long term result is more pain for producers, then fewer producers and retail competitors, and eventually consumers pay more," he said.
"We don't believe Coles or Woolworths, or anybody, can afford to leave the price of milk at just $1 a litre it's a short term attack on competition and a medium term hit on suppliers."
And despite a much publicised discounting war, Mr Driscoll said a lack of strong competition in Australia's retail food sector meant overall prices rose at least 40pc in the past decade well ahead of the OECD average for much of that period.
National consumer advocate group, Choice, is also concerned short term price busting leaves consumers missing out on genuinely lower food prices in the long run.
"If the majors have so much power that they can upset an entire industry in a way that leaves processors, producers and other retailers unsustainable, then its clearly not true competition," said Choice spokesman, Christopher Zinn.
He said unfortunately for farmers, like milk or meat producers, fresh food seemed to be the battleground where supermarkets were fighting hardest to win new customer loyalty and expand their 50pc share of that trade (compared with their 70 80pc share of dry grocery sales).
"We don't begrudge consumers getting a good deal from discount campaigns at a time when food prices are generally rising around the world, but it can reduce consumer attitudes to food to just being all about 'bucks, bucks, bucks'."
Although some consumers were more interested in food quality and how it was produced, he said aggressive marketing using private label products was a rising global trend and many shoppers now made buying decisions based largely on these cheap price signals.
Supermarket suppliers agreed, severe discounting tended to "dumb down" consumer appreciation of just how expensive it was to produce quality food.
"Cutting prices on fresh grocery items can make it hard to achieve a fair price that truly represents what it costs to grow and deliver to the store," said a Coles supplier who wished to stay anonymous.
"I think price wars prompt consumers to question why something hasn't been selling at this lower price all the time, or else they have doubts about the quality of a product if it is now 33pc cheaper than last week."
"At the end of the day the real loser is the producer. Any retailer cutting a selling price can't continue buying from a supplier for the same price without hurting his profit margin.
"Retailers are not God, they're in business to make a profit.
"However, there's one thing supermarkets find worse than paying too much for a product and that's not having enough to fill their shelves, so they have to pay a good price to get a guaranteed supply."
"They're not bastards all the time."
Woolworths and Coles already extend their activities well beyond mainstream groceries to include hotels, bottle shops, electronics and variety stores and petrol stations.
Their parent companies also own hardware, coal mining and insurance interests.
"Given their track record, nothing these guys might do surprises me any more, not even overseas farms or house brand packaging centres are out of their grab," said United Retail Federation (URF) national president, Scott Driscoll.
"They already have poker machines, they want to get into optometry and pharmacy, what's to stop them importing from their own farms in certain parts of the world or running off shore packing sites for house brand produce?" Mr Driscoll asked.
Woolworths and Coles own about 80 per cent of all Australian supermarkets, well ahead of the market share enjoyed by comparable joint market leaders in Britain, Tesco and Sainsburys (48pc) of the US Wal Mart and Kroger (20pc).
The local supermarket duopoly achieved sales totalling about $40.1billion in the first half of this financial year and on average capture about 24 cents in every retail dollar spent in Australia.
Returns to farmers from supermarket food sales are as little as five per cent according to the National Farmers Federation (NFF).
NFF president, Jock Laurie, is demanding the Australian Consumer and Competition Commission (ACCC) to "sit up and take notice" about the pressure local producers are under to deliver cheap food at "first world" production standards, while being benchmarked against products grown overseas where fewer quality assurance standards, farm safety and environmental considerations apply.
"The Australian public has to give some serious thought to the expectations and direction of our food retailing industry before it gets far too late for some of our agricultural sectors," Mr Laurie said.
At the URF Mr Driscoll, who represents independent grocery operators like corner shops, service stations and IGA supermarkets, said he did not believe Coles had cut its milk or bread prices to benefit consumers "it's all about wiping out other retailing competitors".
"If Coles succeeds in buying still more market share by using cheap generic brands, the long term result is more pain for producers, then fewer producers and retail competitors, and eventually consumers pay more," he said.
"We don't believe Coles or Woolworths, or anybody, can afford to leave the price of milk at just $1 a litre it's a short term attack on competition and a medium term hit on suppliers."
And despite a much publicised discounting war, Mr Driscoll said a lack of strong competition in Australia's retail food sector meant overall prices rose at least 40pc in the past decade well ahead of the OECD average for much of that period.
National consumer advocate group, Choice, is also concerned short term price busting leaves consumers missing out on genuinely lower food prices in the long run.
"If the majors have so much power that they can upset an entire industry in a way that leaves processors, producers and other retailers unsustainable, then its clearly not true competition," said Choice spokesman, Christopher Zinn.
He said unfortunately for farmers, like milk or meat producers, fresh food seemed to be the battleground where supermarkets were fighting hardest to win new customer loyalty and expand their 50pc share of that trade (compared with their 70 80pc share of dry grocery sales).
"We don't begrudge consumers getting a good deal from discount campaigns at a time when food prices are generally rising around the world, but it can reduce consumer attitudes to food to just being all about 'bucks, bucks, bucks'."
Although some consumers were more interested in food quality and how it was produced, he said aggressive marketing using private label products was a rising global trend and many shoppers now made buying decisions based largely on these cheap price signals.
Supermarket suppliers agreed, severe discounting tended to "dumb down" consumer appreciation of just how expensive it was to produce quality food.
"Cutting prices on fresh grocery items can make it hard to achieve a fair price that truly represents what it costs to grow and deliver to the store," said a Coles supplier who wished to stay anonymous.
"I think price wars prompt consumers to question why something hasn't been selling at this lower price all the time, or else they have doubts about the quality of a product if it is now 33pc cheaper than last week."
"At the end of the day the real loser is the producer. Any retailer cutting a selling price can't continue buying from a supplier for the same price without hurting his profit margin.
"Retailers are not God, they're in business to make a profit.
"However, there's one thing supermarkets find worse than paying too much for a product and that's not having enough to fill their shelves, so they have to pay a good price to get a guaranteed supply."
"They're not bastards all the time."