Dick Smith has warned against forcing the break-up of Coles and Woolworths, saying it would only further damage the food sector.
Speaking at the Senate Inquiry into the Australian food processing sector this morning, the entrepreneur also said government protection of the food industry, by enforcing a quota of Australian products, would be a positive move.
Industry protection funds, similar to those in the car industry, could be another viable option, he said.
In his submission to the Inquiry, Smith blamed the current supermarket climate, which is pushing Australian companies and farmers out of work, on rich foreign companies, namely ALDI.
He said dividing up Coles and Woolworths will not improve the situation “because I think they will just become uncompetitive when they become small with the internationals we allow them to compete with.”
Smith voiced his concern that the current “extreme capitalism” environment will lead to WalMart and Costco being the only supermarket companies in the world.
He told the Inquiry he does not believe the infamous milk price wars, which saw Coles drop the price of private-label milk to $1 a litre and Woolworths quickly follow suit, was either of their faults, but rather the blame is squarely at the feet of foreign-owned cheap food retailers.
''I think Coles and Woolworths were reacting to the situation that Aldi and Costco have come here,'' Smith said.
He also wants penalty rates in Australia looked at, and says a reduction in the rates would improve our competitiveness.
''Do we value our country towns?” he asked
“Which I do, do we want to go to these country towns and find them boarded up?
“Because our farmers are paying $20 an hour for labour, (and) will never be able to compete with people paying $5 an hour.
''But don't blame Coles and Woolworths for it, I think we are getting off the track…I think it is the fact consumers want the cheapest prices.''
Smith maintains Australians would readily pay slightly higher food prices if it ensured the future of the food industry.
Unfortunately, recent studies have shown that while most Australians say they would like to buy Australian produced and processed food, the main contributing factor is low price.
Similar rules to those in television broadcasting which impose a certain quota of locally-made content, would be effective in the supermarket sector, he said.
''One idea that I heard a number of days ago which could have potential is that we require Australian supermarkets to have a certain percentage of their sales, say 25 per cent, to be from Australian-owned processors and made and grown in Australia,'' Smith said.
''The advantage in doing that is it will create a level playing field.''
Last month Smith, along with Greg Cooper, chairman of Australia’s largest beer brewer started calling for a dedicated “Australian made” aisle in supermarkets to allow shoppers to easily understand which products are locally made and produced, and therefore keep local industries alive.
The current packaging and import regulations leave most consumers confused, they said.
Smith predicts that ALDI’S share in the supermarket sector, currently sitting at 8 per cent, will increase gradually over coming years.