The food industry has welcomed the comments by Minister Kim Carr, who voiced his concern about the supermarket dominance at a speech this week.
Speaking at the Australian Food and Grocery Council’s (AFGC) Industry Leaders Forum in Canberra on Wednesday, Carr said he was “particularly concerned about the market dominance of the two major supermarket chains – who now control 80 per cent of retail food sales in this country.”
Carr said that while the current supermarket retail climate is looking dire, there is time for it to be improved.
“Let me emphasise I am an optimist, and with good reason,” he explained, after comments on the two-speed economy in Australia.
“Australia consumes the highest proportion of domestically produced food in the world.
“We have a food processing industry that pays wages for almost a quarter of a million people.
He believes the chance for the Australian food industry to survive on the global stage depends on ensuring it is standing out from the crowd.
“The potential for the industry has never been stronger,” he said.
“The secret of success is innovation.
“We have a highly skilled workforce and a world-class food science industry that matters .
“Our simple message is this: you innovate or you perish.
Carr is extremely concerned with the power of major supermarkets in Australia, particularly off the back of the report from the commissioned by the AFGC that showed 130 000 jobs could be lost in the sector by 2020 if nothing is done.
He believes measures can be put in place to solve the problem.
“On the basis of the claims put to me, there is a case to be concerned about an abuse of market power.
He noted the comments from HJ Heinz earlier this year slamming the supermarket dominance in Australia, saying it was unfortunate that so few companies have the confidence to speak up.
“Giver the reality of the power relationships within the industry, it’s understandable that few companies are willing to speak on the public record.
“For most food manufacturers, their main access to customers is through supermarket chains.
“In practical terms, you deal with Coles and Woolworths, or you go out of business.
The minister said he has been hearing complaints from the industry for some time that retailers are exploiting their dominance by “auctioning off shelf-space with a view to excluding competitors,” as well as
“Extracting concessions in contract negotiations by denying access to shelves.
“Arbitrarily deducting costs for stock handling services – even if the services aren’t required.
“Forcing manufacturers to pay freight charges between warehouses and stores.
“Arbitrarily rescinding contracts mid-term.
“Using their home-brands to destroy the intellectual property of suppliers,” by forcing suppliers to reveal their intended products 12 months before release.
Because the major supermarkets they have to disclose this information to are in fact their competitors now, with so many private-label products on the market, Carr said these practices “kill any incentive to innovate.”
Carr said the government is looking to solve the situation, with $150 million being offered to transform the food industry.
“From our first day in government, Labor has been about one thing: putting innovation at the heart of every firm, in every sector, in every region.”
AFGC chief executive Kate Carnell said the comments from Carr about the commitments from the Gillard government are timely and relevant in the current supermarket environment.
“It fantastic to see Minister Carr and the Federal Government showing leadership on this issue and looking for ways of creating a level playing field in Australia’s retail market,” Ms Carnell said.
“Mr Carr encouraged companies to speak to the ACCC or his office about concerns they might have. He also undertook to look at possible solutions.”
Carr concluded his address with a hopeful call to arms, not only for the food industry, but all of Australia.
“There is plenty of potential in the food sector,” he said.
“There is a great future for manufacturing.
“It’s time we saw it.”
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