Supermarket price wars will only get worse

We know food companies are too scared to criticise Coles and Woolworths at the Senate Inquiry into the anti-competitive practices by the major supermarkets.

We know that businesses and farmers are being pushed out of work by what is described as Australian food producer Dick Smith as “extreme capitalism.’

Now Coles is launching a program which many companies say is just another way it is wielding its power over them.

Adele Ferguson reports for The Sydney Morning Herald on how the new systems being put in place by the major supermarkets will continue to damage the sector.

If there is one message to come out of the fierce price war between Coles and Woolworths it is that life will get a lot tougher for their suppliers as the supermarket giants face the spectre of lower earnings growth and a potential de-rating of the sector.

Coles has introduced a program called ARC (Active Retailer Collaboration) to identify possible efficiency gains, potential cost reductions and data sharing for an upfront fee.

More than 200 suppliers have signed up to ARC agreements, but a number of them are complaining the program is anything but collaborative and is being used as a tactic to screw them further on prices. With Coles and Woolworths dominating the grocery industry with more than 70 per cent of market share, suppliers have little option but to put up or shut up.

The brutal reality is, in the past year, the food and liquor discounting between Coles and Woolworths – and more lately Metcash – has never been as ferocious and the cries from suppliers never louder.

It has refocused the debate on the concentration of Australia’s grocery industry and the long-term toll it is having on Australian suppliers.”

To read the full article, click here.

 

UK bakery fighting “fat tax”

The “fat tax” imposed on foods high in saturated fat is being fought by the biggest bakery chain in Britain, who say taxing the sausage rolls and pasties it bakes in store is unfair.

Greggs bakery will take the Chancellor George Osborne’s decision to impose the Value Added Tax (VAT) on its hot products to court in the next six weeks.

The bakery chain, which has 1500 stores across the UK, has lost £30 million value in its shared after being reclassified as hot food.

Hot food is subject to the VAT, while cold food is not, and chief executive Ken McMeikan told Sky News the change is unreasonable.

“The consumer needs help in making their money go as far possible, not to see an increased tax on something they didn’t have to pay tax on previously,” he said.

Osborne released his Budget last week, which included changes to certain loopholes which allowed some foods to be exempt from the tax.

“At present soft drinks and sports drinks are charged VAT, sports nutrition drinks are not,” he said.

‘Hot takeaway food on high streets has been charged VAT for more than 20 years, but some new hot takeaway products in supermarkets are not.’

Greggs argument is that while it bakes its sausage rolls in-store, it does not make any effort to keep them warm once they’re removed, so they should not be classified as hot food.

McMeikan argues the changes were made without consultation with businesses, and he will meet with government representatives next week to discuss the issues.

‘We will be fighting this all the way,’ he said.

‘At a time when the consumer is under enormous pressure and at a torrid time for the high street, this felt like a tax measure that has been ill thought through and the timing could not be worse.’

It’s no wonder Greggs is planning to argue the tax on its ‘hot foods,’ as the company sells two million sausage rolls alone every week.

Greggs and the National Association of Master Bakers, who have collaborated to launch a legal bid against the decision, will have six weeks to take the matter to court.

When the “fat tax,” was first implemented in Denmark in October last year, Prime Minister David Cameron.announced that the UK was considering introducing a similar measure.

It has also been suggested as a possible way to improve health and nutrition in Australia, among other countries.

Some Australian doctors also want warning labels on energy drinks, while a US study found a tax on sugary drinks could save 26 000 lives per year.

Amazing looking foods you can’t eat

 Last week we reported on research which found that seeing images of foods makes them more enjoyable when you eat them. But what if the food in question looks absolutely delicious, but you can’t eat it because it’s…not actually food?

In a sequence titled Inedible Food Porn in the Daily Life website, amazing artwork made from everything from soap to ceramics are shown…and they all look good enough to eat.

These nuggets and chips might look delicious, but you probably wouldn’t want to eat them…they’re soap.

This hearty breakfast is actually a balloon artwork creation.

And with Easter on the brain, you are probably thinking about biting into some delicious chocolate bunnies like this. But we would suggest not these ones, because they are ceramic. The Easter sugarload already increased those pesky dental bills, and you would definitely need a trip to the dentist after these ones.

Talk about dangling the carrot!

Check out all the photos here.

Fear campaign damaging Supermarket Senate Inquiry

The bullying behaviours and fear campaigns used by the major supermarkets to wield complete power over suppliers is still getting in the way of the Senate Inquiry into the issue.

The Australian Competition and Consumer Commission (ACCC), the Australian Food and Grocery Council (AFGC) are collaborating on the Inquiry into the anti-competitive practises of Coles and Woolworths.

The decision to take the matter to the Senate came after the dairy industry voiced its concern over the  milk price wars which resulted in both the major supermarkets selling milk for just $1 a litre, pushing farmers out of the industry as they struggled to make a living on such small payments.

Countless Australian food companies are either closing down completely or moving their operations overseas, as the influx of private-label products on supermarket shelves leaves them with two choices.

They can try to compete with the supermarkets who are able to sell similar products at ridiculously low prices because of the power they have over suppliers, but the chances of surviving, let alone making profits, are slim.

Or, if you can’t beat ‘em, join ‘em. Many Australian food companies have reluctantly agreed to cease operations as they were and instead use their factories and workforce to supply products for the supermarkets’ private label products.

But if they thought were at the mercy of the supermarkets before, they haven’t seen the worst of it until they relinquish any kind of control they had over their destiny by signing such an agreement.

Because when Coles and Woolworths decide they want to put a product on special, or they need a huge amount of a certain product, you have to deliver.

And if a company can’t deliver on time, or at the price they want to sell the product at? Too bad, Coles and Woolworths say.

“Invariably they say it is not absorbed by the grower or the manufacturer when they cut the prices but in the end it always does,” Jennifer Dowell, National Secretary of the Australian Manufacturing Workers’ Union Food Division, told Food Magazine.

“Companies can’t even transport their own stuff to Coles and Woollies!

“They transport it for you and then just bill you with their high transport prices later.

“And they won’t store stuff that is within a certain timeframe from its use-by date.

“They make the producers store it then tell them they need it within so many hours.

“So producers are in this quandary where they can’t afford to produce stuff and keep it in storage because if Coles and Woollies decide they don’t want to take it they are out of pocket.”

“They have to produce everything at such short notice so they are never able to get a long term view and a stable situation at their factory.”

Nobody willing to speak up

Dowell said the fear campaign the major supermarkets operate with makes it impossible for food companies to criticise them.

“The public doesn’t have enough information about what’s really going on in the industry.

“It’s completely ridiculous that they can’t come out and publically say ‘Coles and Woolworths are killing us’ because they just ensure that they will go out of business.

“If you publically criticise Coles and Woollies, your products will just no longer be put on the shelves, and they’re getting away with that!”

Countless food producers and farmers have discussed the impact of the supermarket dominance with Food Magazine, but almost all are too afraid to go on the record with such claims.

With Coles and Woolworths controlling 80 per cent of the grocery market in Australia, if one or both decided to stop stocking a companies’ product, it really has nowhere else to turn.

Journalists and workers in the industry are all too aware of the dire situation our food sector is in, but nobody is willing to put their name or company to the claims.

The ABC’s Lateline made over 100 calls to get comment from a food producer, and when they did find one willing, he would only speak with the promise of anonymity.

“But after more than 100 phone calls, just one Australian supplier was willing to speak to Lateline about alleged abuses of power by Coles and Woolworths as long as we agreed to hide his identity, like this, (vision shows unidentifiable silhouette of man) and even hide the kind of product he supplied,” Margot O’Neill says in the story.

“But after sleepless nights the supplier pulled out, leaving us to use only his words about why he’s so scared.

“ANONYMOUS SUPPLIER (male voiceover): "It’s quite common for the majors to stop dealing with a supplier … and suppliers to have little chance of a viable business unless they’re serving the two major supermarkets, … so it’s too big a risk to expose myself.

“But I think the power of the big supermarkets is now too large for the proper functioning of our food supply."

And while the ACCC has promised to keep all claims made to it in regards to the supermarkets confidential, few are willing to speak up, for fear they will be found out and punished.

“Without doubt there is a climate of fear when it comes to farmers and food processors speaking out about practices of the big two,” Nick Xenophon, Senate select committee food processing, told the ABC.

“When farmers and food processors tell me that they feel a bit like medieval serfs, they’re beholden to Coles and Woollies as their medieval landlords, then you know there’s something seriously wrong.”

Something has to be done

When asked if she would support a Supermarket Ombudsman, as suggested by the Australian Food and Grocery Council (AFGC), Dowell was welcoming of the idea.

“I’ll support anything at this stage!” she told Food Magazine.

“We have been talking about this for years and I’ve watched it get worse and worse.

“They own just about everything; they’ve got petrol, pharmaceutical, pokie machines and alcohol so essentially they have this massive political influence so they intervene in those areas too.”

With so much control over various industries and governments in Australia, the scary reality is that the major supermarkets may not be stoppable, at least not without specific laws and regulations to stop the behaviours.

“If we get more powers given to the ACCC, any power to an Ombudsman, and get people the ability to raise issues without losing their job, then that is a step in the right direction, because right now they cannot,” Dowell explained.

“My concern is that if we lose food sovereignty, if we lose control of our food chain we become hostage to other countries supplying our food.

“How ridiculous is that? In Australia we have the ability to produce the best food in the world, so how are we getting into this situation?

“Once these companies go, they won’t some back, they’re not going to come back and rebuild factories and businesses because Australia is upset after it basically kicked them out in the first place.

“If we rely on imports, and a country decides it is going to give its own market priority, as it very well should, what do we do? Where do we go?

“At a time when the world is saying Africa needs to have food sovereignty, we’re actually participating in a process where we won’t be able to feed our own people.

“We will be reliant on importing food.

“When we finally hit the wall and find that everything is coming from overseas and we no longer have any Australian food industries, it will be too late.”

How concerned are you about the power held by Coles and Woolworths? How do you think they can be stopped?

New alcohol board unnecessary: Brewers Association

The leading representative body for Australian manufacturing brewers has slammed a new industry group, which it says will create public confusion redirect funds away from established organisations.

The Brewers Association of Australia and new Zealand says the newly formed Alcohol Advertising Review Board (AARB), is an “unnecessary white elephant” that will take funding away from organisations and initiatives which aim to stop alcohol misuse.

The AARB was developed by the McCusker Centre for Action on Alcohol and Youth and Cancer Council WA and has the backing from various organisations.

But the Brewers Association believes the AARB, which was launched last Friday, is unnecessary.

“Australia already has a robust self-regulatory, government-recognised, model for alcohol advertising, naming and packaging through the Alcohol Beverage Advertising Code (ABAC),” Brewers Association CEO, Mrs Denita Wawn said in a statement.

“ABAC provides an independent pre-vetting service and independent complaints adjudication process.

“It is funded through a levy paid by signatories to the Code including the Brewers Association.

“Unlike AARB, the ABAC Scheme has signatories to the ABAC Code that represent 90 per cent of alcohol producers in Australia, including members of the Brewers Association. ABAC signatories are obliged to comply with a decision of ABAC.

She said she is not against their goals to reduce alcohol misuse, but that they would have been more successful if they had approached ABAC with a formal plan for improvement.

AFGC finalises draft legislation calling for Supermarket Ombudsman

The Australian Food and Grocery Council (AFGC) has announced it is finalising the draft submission for a Supermarket Ombudsman to be a key part of the next Federal Budget.

The peak industry body has been urging the government to instate an Ombudsman and establish a Trading Code of Conduct, to stamp out the anti-competitive, behaviours of the major supermarkets, which are pushing Australian food manufacturers and small businesses out of business.

The AFGC announced it would be starting on its draft legislation to present to the government back in January and has enlisted the help of international law firm Baker and McKenzie in its bid.

The AFGC wants the Supermarket Ombudsman to ensure Coles and Woolworths are fair and transparent in their pricing and do not push more Australian companies and industries out of business, as they have done with the dairy and fresh produce industries, among others.

The AFGC also announced last month that it would be extending its representative reach to also include small to medium enterprises.

It will be consulting all stakeholders on the draft legislation this week, before the matter is referred to the government for approval.

Eucalyptus oil distributor fined over false ‘Made in Australia’ claims

The consumer watchdog has found the distributor of Double D eucalyptus oil falsely labelled its product as ‘Made in Australia,’ and have ordered they pay a $6 600 fine.

The Australian Competition and Consumer Commission (ACC) found the product was made from imported oil, which the company tried to pass off as Australian so they could increase costs.

"Consumers should be able to rely on the accuracy of labels, especially when they are prepared to pay a premium for products made in Australia," ACCC chairman Rod Sims said.

The consumer watchdog issued a notice stating it had reasonable grounds to believe that Club Trading & Distribution lied about the oil in its 100ml bottle when it said it came from Australia.

In reality, the oil was actually imported from China and Southern Africa.

"Australian grown eucalyptus oil is readily available to distributors and primary producers are harmed when imported oil is falsely labelled as being made in Australia," Sims said.

"Traders making made in Australia claims need to ensure that their labels are kept up to date to reflect changes in sources of supply.

"Failure to do so may lead to a contravention of the Competition and Consumer Act, infringement notices or court action.”

Steggles defends “free to roam” claims still on products

Steggles chickens are still being advertised as “free to roam” despite the consumer watchdog labelling such claims by the company as misleading and deceptive last year.

In September the Australian Competition and Consumer Commission (ACCC) announced it was taking a number of chicken suppliers to the Federal Court, claiming they wrongly advertised chickens as free range.

According to the ACCC, national Steggles suppliers Baiada Poultry and Barttner Enterprises, La Iconica suppliers, Turi Foods and the Australian Chicken Meat Federation were misleading or deceptive in the promotion and supply of chicken products.

The ACCC said the impression that Steggles chickens are raised in barns with plenty of room to roam freely used in the advertisement and promotion greatly influence consumers, and in reality, most of the animals have a space no larger than an A4 sheet of paper.

Despite La Ionica’s decision to stop using the “free to roam” claim and pay the $100 000 penalty as a result of the court case, Steggles and Baiada are refusing to bow to pressure and are instead arguing against the ACCC’s claims.

John Camilleri, the managing director of Steggles’ owner Baiada Poultry yesterday told the Federal Court in Melbourne that he ordered the slogan ”free to roam in large barns” be removed from chicken packaging in August last year.

He said the differing rates at which products are stored and sold makes it impossible to eradicate any reference to “free to roam” claims overnight, and his objective is to have “hardly any” chicken with the slogan for sale by the end of April this year.

”What we don’t have control of is any stock that’s in obscure locations,” he said.

”Some of these products have a shelf life of 18 months.”

He said Baiada limits the density of chickens in its sheds to 36 kilograms per square metre, although the limit set by national poultry rearing regulations is 40 kilograms per square metre.

During the case, Camilleri vocalised what many in the industry already know about the storage and distribution protocol of the major supermarkets.

The ACCC’s counsel, Colin Golvan, SC, asked him to explain why a frozen chicken bought by a representative of the regulator last month in the Melbourne CBS still had “free to roam” on the packaging.

Camilleri explained that the product had old packaging, because ”God knows how long Coles have been storing that or where it’s been stored.”

The trial is continuing.

Which food companies deserve to be admired?

Nestle is the most admired food company with PepsiCo just behind, according to latest surveys.

Unilever was next on the list compiled by Fortune Magazine, with Kellogg’s rounding out the top five.

Lower down on the list was Kraft Foods, H.J Heinz and Sara Lea, at 7th 8th and 12th respectively.

The findings are particularly interesting in the current retail environment, which is pushing food manufacturers to streamline their workforce and look abroad for cheaper manufacturing areas.

Yesterday it was announced that between Mars and Murray Goulburn, 100 Victorian jobs in the food sector will be lost this month.

This comes after the state already suffered the Heinz tomato processing facility in the tiny town of Girgarre closing, which saw 146 workers lose their jobs.

Considering that only 420 residents of Girgarre are aged between 15 and 64, it is a considerable percentage of the town.

Heinz blamed the retail pressures and high Australian dollar for its decision to relocate the facility to New Zealand, as have many other Australian companies and industries.

Do you agree with the list of admired food companies? Which food companies do you admire?

Advertisers turn on The Circle: but is it for their own benefit?

Food companies are racing to end sponsorship deals with Channel 10 program The Circle, following the now-infamous comments directed at a decorated Australian war hero.

When an image of SAS Corporal Ben Roberts-Smith in a swimming pool was shown on the program last week, host Yumi Stynes commented that ”he’s going to dive down to the bottom of the pool to see if his brain is there”.

George Negus added, "I’m sure he’s a really good guy, nothing about poor old Ben. But that sort of bloke, and what if they’re not up to it in the sack?"

The panel and studio audience laughed as phrases like “dud root” were exchanged about the Victoria Cross recipient.

The backlash against Stynes has been intense, especially in the social media arena, and she is now dealing with death threats, threats against her family and racial vilification.

While there is not doubt Stynes and Negus should never have made the comments, sometimes these things happen on live television.

All involved, including Stynes, Negus and Channel Ten have apologised for the remarks, and Roberts-Smith has stated that he understands the comments were not intended to be malicious, but the heat is not dying down.

Food companies and other sponsors were clambering to get statements sent out to journalists as soon as the public started its uproar.

Jamaica Blue has ceased all advertising on the program, saying “After much deliberation, the Foodco Group – owner of the Jamaica Blue franchise brand – has opted to cease its sponsorship of The Circle, effective today.

“As Foodco has previously stated, we do not – in any way – endorse nor condone the offensive remarks broadcast on The Circle last week regarding SAS Corporal Roberts-Smith.

“As an Australian-owned and operated organisation, the Foodco Group has the utmost respect and admiration for those who have served, and who continue to serve, in Australia’s Defence Force.

“We’re grateful to our many customers who have contacted us via Facebook and other channels to express their strong feelings concerning Jamaica Blue’s association with The Circle.

"Foodco’s decision to end our partnership with The Circle was ultimately based on a range of factors – including the strong feedback of our Jamaica Blue customers.

"We wish all who are affected by last week’s unfortunate comments the very best in moving forward.

Swisse Vitamins and Big4 Holiday Parks have also ceased advertising on the program, but none have done so quietly.

As advertisers continue to shout their decisions to cease sponsorship from the rooftops, many experts are starting to paint the move as nothing more than a modern advertising scheme, aimed to keep consumers aware of their brand and their commitment to doing what their customers want.

As Sydney Morning Herald writer and former marketing editor Julian Lee wrote, “How different it would have been a few years ago when, at the first sign of trouble, advertisers ran for cover, pulled the phone out of the socket and locked their doors in the hope that trouble would just pass.”

Nowadays, a possible crisis is nothing but an opportunity for clever marketing managers, and they are jumping onto social media, their own websites and anywhere else they can think of to let the public know what they are doing.

Do you think it’s just free advertising for companies to pull their sponsorship, or is it proof that they are listening to their customers’ stance on these issues?

Coles told to pull its socks up in Twitter experiment gone wrong

In a spectacular social media failure on Coles’ part, the supermarket giant has copped criticism from consumers, who insist it stops ripping off farmers and profiting from pokie machines.

Coles sent out a seemingly innocent sentence for its Twitter followers to finish yesterday, although in hindsight it must have realised it was a recipe for disaster.

“"Finish this sentence: In my house it’s a crime not to buy…” it wrote, and finish they did.

One responded with “In my house it’s not a crime to buy BREAD AND MILK AT PRICES THAT ALLOW PRIMARY PRODUCERS TO SURVIVE”

“…from our local IGA & farmers market as we support our farmers,” said another, and “fruit & veg from a place that pays their farmers fair prices & sells seasonal produce not stored in a freezer or artificially ripened,” said one disgruntled shopper.

While the issues surrounding Coles’ predatory pricing and unfair treatment of farmers and suppliers was the main issue Twitter users shot back at the supermarket giant, it was not the only thing on people’s minds.

“In my house it’s a crime not to buy… Food from markets while Coles exploits mental illness via pokies,” said one.

“In my house it’s a crime not to buy media influence with the billions we made from mining!” another user said.

Even the jingles and famous faces used by Coles to market its products was not spared.

“It’s a social media crime to….. Hire curtis stone,” one Twitter user responded, while another replied “ In my house it’s a crime not to buy…the rights to good songs so I can turn them into steaming turd piles.”

All in all, the social experiment was summed up accurately by another Twitter user, who said “@coles "Finish this sentence" was a social media #fail. You suck.”

You can view more of the responses to Coles’ question on Twitter.
 

Beer, dating ads targeted at young girls on game website

The Bratz Doll website has copped criticism from health experts, who are outraged over advertisements for alcohol, energy drinks, junk food and dating services on the site targeted at young girls.

The website, which also offers Snow White and My Little Pony games, automatically plays 30 second ads prior to the games starting.

Everything from Crown Lager to Mars Bars are advertised on the website, Red Bull is even selling its products with a cartoon featuring a cartoon of Little Red Riding Hood.

Earlier this year health experts were calling for warning labels to be mandatory on energy drink packaging, with the rate of calls to health hotlines increasing as a result of the drinks.

Teenage males were to most common callers to the centres, reporting tremors, heart palpitations and inability to sleep after consuming energy drinks.

With the rates of obesity rising, and the associated conditions becoming more well known, there have been calls from health organisations, doctor groups and even political parties to have any advertising of junk food in children’s programs on TV and online stopped.

Cancer Council of WA policy officer Rebecca Johnson told The West Australian it is almost impossible to stop the advertisements because despite suggestions from health groups that companies should stop advertising junk to children, the regulations are not strong enough to do anything.

A complaint made to the Alcohol Beverages Advertising Code complaints panel about a Crown Lager advertisement that appeared on the Bratz website has been dismissed, she said.

Foster’s said a "technical error" caused its beer to be advertised on the website.

There is also not any recourse for the Red Bull advertisements because the code does not cover online ads.

McCusker Centre for Action on Alcohol and Youth director Mike Daube said the placement of the ads on a site accessed by girls as young as three was completely inappropriate.

"It shows the outrageous lack of control over websites, and the alcohol promotion is completely inexcusable," Daube said.

"We’re seeing beer advertising to toddlers which shows the voluntary system is a complete sham."

He has written to Federal Mental Health Minister Mark Butler and other politicians calling for laws to control advertising on children’s websites.

Do you think we need government legislation to stop advertisers aiming these products at children?