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Heinz slams Australian supermarket dominance

Heinz has again slammed the marketing power of the big two supermarkets, saying Coles and Woolworths have created an “inhospitable environment” for suppliers.

The company’s chief financial officer and executive vice president, Arthur Winkleback told US analysts said the demise of many Australian companies can be attributed to the supermarket wars.

”This is, as many of our peers have talked about, a very difficult environment,” Winkleblack said.

”The reality is with two key customers there has become an inhospitable environment for grocery manufacturers.

"With it being such difficult market, we’re going to take the measures … to address that.

"We’ve seen our margins squeezed as the pressure comes on.”

Earlier this year Heinz controversially announced it is sending its tomato processing facility from the tiny Victorian town of Girgarre overseas early in 2012, as part of what Heinz Australia corporate affairs manager Jessica Ramsden labelled a “global productivity plan that will increase our manufacturing efficiency and make better us of existing capacity.”

She told Food Magazine it is a priority for Heinz to ensure the wellbeing of the 340 workers who will be out of work from the Girgarre factory as well as Wagga Wagga and Northgate.

“We are working closely with our employees to assist them to find alternative employment. State and Federal Governments are also providing assistance with outplacement and retraining programs.”

Off the back of the Heinz closures, as well as redundancies at SPC Ardmona and Bluescope Steel,
the Australian Food and Grocery Council warned more job losses are imminent, as the Australian dollar continues to rise and companies can no longer afford to operate here.

While Heinz did not name Woolworths and Coles specifically, the comments seem to be the latest in a sting of attacks over the market share the big two supermarkets have.

It’s not the first time the company has made its thoughts on the Australian market known, with chief executive Bill Johnson labelling Australia the “worst market” in June, saying Australian consumers would be the “biggest losers” from the decision to strip branded products.

His comments followed the decision by both supermarkets early in the year to drastically reduce the price of their home brand milk, much to the disapproval of dairy farmers, and to increase the shelf presence of their own branded products.

The only response from the big two supermarkets over the comments came in the form of a statement from a Coles spokesperson to The Sydney Morning Herald this morning.

”We agree with Heinz’s comments that companies need to be competitive to ensure the best outcomes for customers,” the spokesperson said.

Earlier this month an expert on food production has told a national conference Australian food processors will not be able to compete with major food retailers.

Speaking at the Crawford Fund Annual Conference at Parliament House in Canberra, Dr David McKinna said the margins of Australian food processors is not enough to support reinvestment required to be able to compete on a global stage.

McKinna, a market trend analyst, said the current dire situation in Australian will continue.

“The tension between major supermarkets is driving massive restructuring of the agrifood supply chain,” he said.

“The turning point in the power shift has been the dramatic weakening of producer brand power.

“Food processors have been wounded by competition from private labels, the inability to reinvest in innovation and branding and being forced to de-engineer products to meet price points.

“Without doubt, global food companies must all be considering closing Australian processing facilities.”

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