Coles points finger at Coke in latest pricing debate

The MD at Coles has pointed his finger at Coca-Cola Amatil and other multinational Australian manufacturers, claiming prices in Australia are too high.

In the latest chapter of the grocery pricing debate, Ian McLeod, Coles' MD, said manufacturers are asking for much higher prices in Australia than in other overseas markets.

As part of the final stages in the creation of a voluntary code of conduct for dealing with manufacturers, McLeod is asking manufacturers to lower their prices for Australian retailers.

McLeod told Financial Review Sunday, on Channel Nine, “In Asia I see Coca-Cola selling for one-third the price in Australia – that raises another question mark … When it’s 60 percent cheaper then you start to question why it should be so much more in Australia. And those are the challenges that we will then put back to the suppliers and say why is this? Why can’t we get a better price, give a better price to the Australian customer?"

He also mentioned the wine industry, arguing that manufacturers are being sold overseas at a discount to local prices.

"You can take wine from Australia to the other end of the world and sell it at a lower retail price – that causes me to question the price being charged here," he said.

McLeod's comments come at the tail end of the creation of a voluntary code of conduct, aimed at regulating and improving the relationship between supermarkets and retailers.

While many producers are in favour of the code, some even pushing for it to be mandatory rather than voluntary, McLeod said it could do more harm than good, and could even bump prices up further.

"If you are not careful prices could go up on the back of it. It adds the risk of an administrative burden, it could mean it takes away the negotiating position of one party or another and therefore we are not able to negotiate the best deal for the customer," he said.

When McLeod first took on the challenge of revitalising the supermarket giant five years ago, consumers, he said, were complaining that grocery prices were too high.

"Those criticisms were being levelled at the supermarkets, they weren’t being levelled at the suppliers," he said. "When we came in and we had a look at what prices were in Australia relative to the prices that were being charged in other countries, we could see difference in price.

"There may be a reason for those differences in price, but you have to question and challenge some of them when you see them."

Just last week news broke that both Coles and Woolworths were planning to tackle the pricing issue with multinational suppliers, with Coles calling for an independent analysis of wholesale pricing, on the basis that local and overseas prices differ so greatly that they can't be blamed solely on distance, higher production costs or the size of the Australian market.

Woolworths agrees that prices need to be reviewed, giving examples of the pricing of products such as toothpaste and deoderant. According to the supermarket giant, the wholesale prices of these items can be 25 to 40 percent higher than the retail price of the same product in the US or the UK.

McLeod also addressed claims, now being investigated by the ACCC, that the supermarket chains misuse their market power to force suppliers to agree to unreasonable conditions.

"We’re not bullies at all," he said.

And he's got recent survey findings to support him – albeit Coles-commissioned ones. A survey in 2008 found that Coles was rated 14th out of 15 suppliers, but this jumped up to a top four position out of 16 in a recent survey.


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