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Heinz slams inundation of supermarkets’ home brand products

One of the world’s biggest manufacturers, HJ Heinz, has again come out swinging in the debate over supermarket private label products, blaming the closure of one and downsizing of two of its Australian factories on the supermarket dominance.

In August,the company’s chief financial officer and executive vice president, Arthur Winkleback told US analysts that the demise of many Australian companies can be attributed to the supermarket war and said they have created an “inhospitable environment” for manufacturers.

Now, it’s the executive chairman, chief executive and president’s turn to take aim, with William Johnston telling investors the company has had to overhaul its business strategy in Australia to deal with the supermarket dominance of Coles and Woolworths.

”The reality on Australia [is that it has] almost come to the point that it’s … immaterial to us going forward because it has taken such a hit,” he said.

”We are confronting a combination of weak categories, relentless promotional pressure and growing private label, as well as executional issues.”

Johnston is the latest in a sting of executives and experts to slam the continual price cuts and increasing number of private label products in Australian supermarkets, which has been labeled “unattainable,” and accused of a “dramatic weakening of producer brand power.”

Johnson labelled 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.

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

On 7 November, the impct of the milk price wars became apparent, with the biggest national milk processor, Lion, recording a profit loss.

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

Earlier this month, the food industry welcomed the comments by Minister Kim Carr, who voiced his concern about the supermarket dominance.

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 he 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 no changes are made.
 

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