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Down Down: Coles admits forcing suppliers to reduce prices

‘If you’re seeing suppliers who’ve got margins that are maybe four or five times the rate of your own profit margins, then if you’re looking at the share of the investment in terms of bringing prices down, we felt as though suppliers in some instances can contribute more,’ –  Ian McLeod, Coles Managing Director

With over 70 percent of the Australian grocery market, food manufacturers and processers have been crying foul for a number of years over the dominance of Coles and Woolworths, forcing down supplier prices.

In a rare admission the the ABC's Background Briefing, Coles MD Ian McLeod has said that whilst they are forcing suppliers to reduce their margins, he does not believe this is an abuse of market power.

The Background Briefing report also features suppliers, speaking on condition of anonimity, claiming buyers for the  big two are essentially blackmailing current suppliers.

  ‘At some stage we started feelingand this is what I hear from other companies as wellthat their behaviour was really blackmailing,’ the supplier says. ‘The supermarkets expect a certain quantity of sales from your products and if that is not met they request a lump sum of money to be passed on to pay for that shortfall. Or another example is being asked to pay to be on the shelf in the first place, and that would mean a lump sum that has to be paid.’

The full Background Briefing audio is below. The transcript will be available tomorrow on the Background Briefing website.

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