ACCC pledges to crack down on supermarket dominance

The Chairman of Australia’s competition watchdog has come out swinging over competition in local markets including the food industry.

Chairman of the Australian Competition and Consumer Commission (ACCC), Rod Sims, outlined the current ACCC priorities at the Australia Israel Chamber of Commerce’s Business Leaders Lunch in Perth yesterday.

According to Sims, of the 40 to 50 cases the ACCC always has in the Federal Court, about a quarter is related to competition.

“We currently also have 35 separate investigations underway into misuse of market power, cartels, or cases involving a substantial lessening of competition,” he told the audience.

“While these cases are complex, and take considerable time and resources to investigate and then prosecute, the deterrent effect of our work is substantial.”

As part of the ACCC’s bid to improve competition in Australia, which would include taking on even more competition cases, he outlined a strategy it would be using.

It will be focused on the online economy, cartels and misuse of market power and other anti-competitive behaviour, especially in concentrated markets, such as the supermarket industry.

In terms of the digital and online markets, which the ACCC has outlined as a key priority after a strategic review this year, as it poses two of the biggest regulatory challenges.

Digital marketplaces

They are ensuring consumers enjoy the same protections in the digital and online economy as they do in other environments, and making sure there is fair competition in the digital and online economy between new and innovative competitors and their older counterparts.

“We are examining whether certain current bricks and mortar leading firms are seeking to prevent online competition in ways that breach the Competition and Consumer Act (CCA),” Sims said.

“I recently heard one such retailer claiming that bricks and mortar incumbents will dominate online shopping in future and see off completely new solely online competitors.

“It would be a missed opportunity for competition if this became the inevitable outcome.

“Our cases against Ticketek and Flight Centre are two prime examples of our enforcement work to ensure competition online.

“A related case is our successful court action against Apple for misleading consumers about Apple 4G iPad’s capacity to connect to the 4G network in Australia which also has competition implications.

“Other firms, Samsung for example, sell tablets which compete with the iPad and which can connect to Australia’s 4G network.

“Those firms are entitled to compete in a market that is fair in terms of the claims that are made about what the devices can do,” Mr Sims said.

Sims also discussed the misconceptions cartels have about legal conduct, saying the key focus area for the watchdog could result in prosecution.

“Combating the damage cartels wreak on other businesses, consumers and the economy has been a major ACCC priority for some time,” he said.

“For over a year now we have been taking a more proactive approach to cartel conduct, following results from the 2010 Melbourne University Law School research that showed 58 percent of businesses don’t know that fixing prices, rigging bids, sharing markets and restricting supply is a criminal offence that can result in a 10 year jail sentence and of the 42 percent of businesses that understood the potential criminal nature of cartel conduct, almost one in 10 said they’d still be likely to join a cartel if the opportunity arose.”

“Our proactive enforcement and education program aims to bed down the new laws and increase awareness of them.

“We have 10 current cartel enforcement matters before the Federal Court.

“We have a number of active cartel investigations currently underway.

“We have conducted a direct mail and email campaign to targeted and general industry sectors informing them of the criminal penalties and how immunity can free them from prosecution.

"This includes letters to 2,500 executives in the heavy construction and construction supply industries.

“We have made and distributed a short film called The Marker that shows how involvement in cartels can ruin your business and your life – I have personally sent copies to the CEOs of the 300 top ASX listed companies urging them to show it to relevant employees at all levels of the organisation

“We have gained significant media publicity around our most recent court case and the launch of The Marker”.

Misuse of market power

Sims pointed out that due to the size of the country and our distance from other markets, there are many concentrated markets in Australia, and the misuse of market power must be stopped.

He said the ACCC is carefully observing key markets where this is occurring to make sure no mergers or arrangements that substantially lessen competition, are occurring, and where the obvious market power is not misused to prevent or damage competition.

Anyone within the supermarket industry would know that it is one of the markets the watchdog must be keeping an eye on, following an intense couple of years of price cuts and damage to suppliers’ businesses by the big two dominant forces,  and while Sims maintained the markets being targeted are confidential at this stage, he did outline the three most pressing areas.

“Issues relating to the treatment of suppliers by the major supermarket chains,  which include competition issues as well as allegations of unconscionable conduct, business-to-business, which we are keen to pursue generally,” he said.

“Investigating the sharing of information about prices in the fuel retailing sector, and examining the longer term competition implications of the large shopper docket discounts provided between the fuel and supermarket sectors in particular.”

Mergers and acquisitions

The ACCC will be closely monitoring the impacts of potential mergers and acquisitions to ensure they are used for the right purposes – to make companies more efficient – rather than for lessening competition.

“Some of the mergers and acquisitions we review clearly attract a lot of publicity,” he said.

“Understandably, the parties involved in a transaction have an interest in having their merger dealt with as quickly as possible and this can lead to criticism of the length of time the ACCC takes to reach a decision on a proposed merger.

“The length of time our reviews take, and the potential impact on the parties’ commercial time-frames, is something the ACCC is acutely aware of and is taking a number of steps to address.

“The publication of a Statement of Issues is part of the ACCC’s processes that ensure transparency of our consideration of merger proposals.

“We will take account of the reactions from the market and the merger parties to the concerns we have outlined.
“At this stage we aim to make a final decision on this transaction in mid-October.

“Close scrutiny from the ACCC will be particularly the case in concentrated markets.

"As I noted above, we want to ensure that mergers will not result in structural changes leading to a substantial lessening of competition.

“While there are a range of factors to take into account in assessing mergers under section 50, market concentration is a key factor.

“When a merger is a “3-2” – so, when a merger reduces the number of key players in a market from three to two – the parties should not be surprised that the ACCC would want to carry out a full review.

“With only two principal players remaining in a market, each will learn to anticipate the actions and reactions of the other. 

“In these circumstances, the ability of the two remaining firms to raise prices or reduce quality for consumers generally increases.”

What are your thoughts on Sims' comments? Do you think the new plan by the ACCC will improve the food sector? What else needs to be done?

Kraft to buy remaining stake in Moroccan biscuit company

Global food giant Kraft has signed an agreement to acquire the remaining 50 per cent stake in Moroccan biscuit manufacturer Biscuiterie Industrielle du Moghreb (BIMO).

Kraft announced yesterday it will purchase the remaining share from local investment holding National Investment Co (SNI) for MAD1.31bn (US$150m).

Last year Kraft split the company into two parts, to further growth in different sectors of the food market.

The US food giant said the latest acquisition is part of its overall strategy to grow in developing markets, and that operations in the Middle East and North Africa are "an important part" of that plan.

It plans to continue to grow BIMO and its brands in conjunction with Kraft Foods' broader Moroccan operations.

The move will "ultimately benefit BIMO and the Moroccan economy as a whole,” according to of Kraft Foods Middle East & Africa, Lawrence MacDougall.

"For several years, Kraft Foods and SNI enjoyed a strong and successful partnership in the jointly-owned BIMO, and this transaction is clearly aligned to fit our respective strategies,” MacDougall said.

"I am excited about our business prospects in Middle East and Africa in general, and in Morocco in particular, where this agreement will serve to reinforce our position as ‘a global snacks powerhouse' not only internationally but also in this region.”

The finalisation of the acquisition will depend on customary regulatory approvals.

Man killed at Perth packaging factory

A man was killed at a packaging factory in Perth when he got caught in a robotoc pallet loader.

The incident, which occurred at the Richgro Garden Products factory in Jandakot, in Perth’s south on Saturday, is being investigated by WorkSafe.

No further information on the incident or the deceased is currently available.

Dick Smith only wanted controversy: News Ltd

News Limited has offered its perspective on debate over its decision not to include marketing material from Australian entrepreneur Dick Smith in its papers.

David Penburthy writes for The Punch:

“When you walk into the Commonwealth Bank you don’t see advertisements on the walls attacking banks for paying obscene salaries to their executives. McDonalds would refuse to place banners outside its stores stating that Big Macs are rubbish and the Whopper is a superior burger. In a similar vein, News Limited, the publisher of this website, has taken the unremarkable commercial decision not to use its products as a vehicle to trash its reputation.

The person in question is Dick Smith and the material is a 28-page magazine he has written called Dick Smith’s Magazine of Forbidden Ideas That You Won’t Read About in the Mainstream Media.

As a businessman, Smith has harnessed the concept of martyrdom – be it real or imagined – as his preferred marketing technique. He has made millions presenting himself as a nuggetty Aussie battler taking on the big guys, despite being bigger than most in Australian business.

ndeed some of his wealth has come from pinching market share from local businesses, such as the family-owned preserves producer Beerenberg,whose boss said last month that it was struggling to sell its productsbecause of Smith’s posturing as one of the only patriots in the field of jam production.

In a way, the last thing Smith would have wanted was to have his magazine inserted in News Limited publications, as it would undermine his claim of persecution as the basis for making profits. The magazine is so totally out there that it seems he deliberately went overboard to ensure it wouldn’t be carried as an advertisement, as it is filled with conspiracy theories involving Rupert Murdoch’s American citizenship, this company’s (non-existent) refusal to run pieces calling for a smaller Australian population, our alleged bias against climate science, our supposed determination to attack Smith for using patriotism to make money.

Even the independent website Crikey, hardly a friend of News Limited, rana piece by former Media Watch producer David Salter saying it was “not surprising” that News refused to run the insert, and attacking its content as the work of an “egomaniac” falsely claiming a conspiracy.

I would not be so disrespectful as to call Mr Smith an egomaniac, even though, as Crikey points out, there are 29 photos of him in his 28-page insert. He is certainly a conspiracy theorist and his theories do not pass muster.

Smith’s obsession with News Limited is so acute that he misrepresents both our general conduct and our specific treatment of him. A few years ago I heard him on ABC Radio after the Victorian bushfires saying News Limited had never given a cent to charity. I rang the station and asked (fruitlessly) to go on air to point out that in the previous week News donated $1 million to Victoria. I could fill the rest of this column with similar examples, be it families who made the news for tragic reasons, cultural bequests for the arts, money for our State Library, the Pride of Australia awards for unsung community heroes.”

Read the full article at The Punch.

What do you make of the controversy between Dick Smith and News Limited? Who is in the wrong here?

Supermarkets are killing farmers: Katter’s address to Parliament

Controversial Queensland MP Bob Katter has slammed the actions of Australia’s largest supermarkets, saying the market share between the big two is unsustainable and killing farmers.

“In 1991 in Australia, two supermarket giants had 50.5 per cent of the food market,” Katter told the Federal Parliament on Wednesday.

“In 1999, John Howard, the Prime Minister, agreed to an inquiry.

“By that time the market share of the two supermarket giants had risen to 65 per cent.

“Everybody knew that their market share was shooting through the roof.

“The inquiry, comprising all parties, including the Australian Democrats, effectively recommended that nothing be done.

“There were three alternatives.

“One was, as the National Association of Retail Grocers of Australia, or NARGA—the independents—asked for, a capping at and divestment down to 22 per cent of market share for each of the giants.

“A second was to go to American trust laws.

“The third alternative was to considerably strengthen the Australian Consumer and Trade Practices Act.

“Not one of the three alternatives was adopted by the committee.

“No-one can read their report—an excellent report, I might add—and not understand that the major parties in Australia are controlled by Woolworths and Coles.

“No other country on Earth would accept this situation.

“Let me give you the figures for other countries.

“The report I am referring to, Fair market or market failure, gives the figures for other countries. “There is not one other country on Earth where the big three have even 25 per cent.

“But in Australia, when this report came out, they had 65 per cent.”

Chemical dangers

Katter said Australia’s free trade agreements are damaging the health of consumers who are unaware of the origin of their food or the way in which it is grown and manufactured in foreign countries.

As Australian Dairy Farmers (ADF) Director Terry Toohey told the Food Magazine Industry Leaders Summit recently, the reliance on imports could leave not only Australian companies and farms out of business, but also pose a risk to consumer safety.

“How can we encourage people to buy Australian products, certainly it appears that they can buy the products cheaper overseas, and they will do so,” Toohey said.

“Some of the issues, as farmer I can relate to are things like apples for example, or oranges, these products that those fruits and veggies are soaking in, we can’t [use] those chemicals here in Australia.

“Yet the imports can come in.

“We use clean water to wash these fruits but some of the chemicals they use over there have been gone for 10, 15 years out of Australia.

“But that’s quiet alright, we have no say and the government just won’t listen to us.”

Katter agreed in his address to the Parliament.

“We cannot sell on the world market because of the massive subsidies from the other countries,” he said.

“It is almost impossible for us to compete on the world market.

“So we come back to the Australian market, and week after week, day after day, product is brought in from overseas.

“Hardly a week goes by where there is not something in the papers about some new commodity coming in from overseas.

“I am told that Woolworths has a whole three-storey building employing people doing nothing else except sourcing cheap food from overseas.”

“We cannot compete in apples.

“I said, 'Hold on, it's America and New Zealand,' and they said, 'Yes, $9 an hour.' We would pay $19 an hour, and so we should, but the wage in the United States in California is $9 an hour, and in New Zealand it is $9 an hour.

“The apples will also be coming in from China, where the average income is $5,000 a year.

“How can we compete against those apples?

“Everybody knows they have fire blight.

“You had the reason to keep them out, but you did not.

“You are so in love and enamoured with and obsessive about free trade that you will bring those apples in knowing that they have been sprayed with streptomycin, antibiotics, to get rid of the disease.

“You know that.

“So I will be moving legislation in this House so that, if you want to bring an apple in from those three countries which have fire blight and spray with streptomycin—because we have no way of checking whether it is sprayed with streptomycin—every apple will have a marker on it.

“We heard the minister stand up today on cigarettes.

“There is a serious danger to our health from these apples.

“Everyone will have a marker: 'This product has not been grown or processed under Australian health and hygiene standards and may be injurious to your health.'”

Katter discussed his disappointment with the current prawn farming industry in Australia, saying they also pose a risk to public health and safety.

“I say with very great pride that, as a minister [in the Qld Government], I have been attributed with the creation of the prawn- and fish-farming industries of Australia—and no doubt my department played a very key role in the establishment of those industries.

“Prawn and fish farming in Australia rose up to $600 million at one stage.

“We have virtually no prawn farming at all now in Australia.

“We thought we would catch Thailand at $2,000 million. Thailand has gone up to $8,000 million; we have gone down to nothing.

“And that is because Woolworths and Coles are bringing their prawns in from Vietnam, China and Thailand.

“In Vietnam they actually use raw sewage in the ponds.

“In Thailand, they put the raw sewage in the river, and in China they put raw sewage in the river and take raw sewage out.

“We have to have pure, bacteria-free water going in and pure, bacteria-free water going out, which is impossible, so forget about any prawn farming in Australia.

“But those prawns are coming in, and we know they are carrying diseases.

“They have to be.

“They are being brought up in a bacterial environment.

“So once again, as far as I am concerned, every single little box of prawns anywhere in Australia will carry that label on it.

“At the very least, that will slow Woolworths and Coles down from bringing them into Australia.”

Unbalanced market share

“Every other country has laws protecting against monopolistic powers—oligopolistic, if I want to be technical.

“Every country on earth has that.

“We have no laws that protect.

“Clearly, if they could rise from 50.5 per cent in 1991, after inquiry after inquiry after inquiry, up to 92 per cent—and these are their own figures, not mine; they are not my figures.

“Every year they claim they have a growth in market share, and I have been tracking them since the ABS series was discontinued and the AC Nielsen series was discontinued.

“There was to be a review in 2002.

“Both series were discontinued in 2002, so we could not prove anything because there were no series there anymore.

“I am not a conspiracy theorist, Madam Deputy Speaker, but it is pretty difficult to write around that one in 2002.

“But, since 2002, Coles and Woolworths have skited to their shareholders about their growth in market share.

“Add that to the 74 per cent they had in 2002 and you have 92 per cent, and we are still doing nothing in this place.”

Katter echoed the comments from various experts within the food industry, who are already noticing the flow-on effects of the reduced farm-gate prices on local communities.

“There will be no newsagents.

“There will be no chemists.

“There will be no florists.

“There will be no bakers.

“There will be nothing.

“They want it all, and this place [Parliament of Australia] has facilitated giving them it all.

“Woolworths and Coles must be acted upon.

“Every four days, a farmer in Australia commits suicide. And that is the note upon which I conclude.”

What do you think of Katter’s comments? Do you agree? Disagree?

The destruction of Sydney’s prime foodbowl

If Prime Minister Julia Gillard wants Australia to be the Asian foodbowl, the government had best start ensuring we actually have enough agricultural land to do so.

One of Sydney’s best foodbowls, the Hawkesbury, is at risk of annihilation as produce farms are dig up and replaced by turf farms and horse paddocks.  

Local representative group, Hawkesbury Harvest believes a lack of proper planning is putting the future production of the region at risk.

"There is capacity for food production to occur in the Sydney basin but the traditional ways of growing food are disappearing," Hawkesbury Harvest chairman David Mason said, told New Ltd.

"Traditional market gardens can't compete with cheaper imports."

Mason says the increasing awareness in some parts of the community about the importance of supporting Australian farmers and local products is leading to an increase in websites connecting consumers to farmers and could prove to be a lifeline for the struggling industry.

"They are viable mechanisms,” he said.

“The old way of farmers picking their fruit and sending it off to a central warehouse or a central wholesaler just doesn't work. They just don't have the volumes that the supermarkets are looking for," Mr Mason said.

"The only way they can guarantee they can be profitable is through direct marketing – from the producer to the customer.

"Those producers that are using the direct marketing mechanism, the market, the box drop and web purchases, are doing quite well."

Dail Miller, chairman of Community Action for Windsor Bridge, a group against a proposed new bridge in the region, said there needs to be more support for the industry.

"The Hawkesbury is arguably Sydney's greatest food bowl," he said.

"Orchardists, farmers and artisan producers grow and create against the rich historical backdrop of the Hawkesbury region and the bordering Blue Mountains.

"The certainty of Hawkesbury's heritage has underpinned the economy for generations.

"Other economic forces have actually caused great uncertainty – universities and air force bases of questionable longevity for example make genuine planning decisions difficult.

“On the other hand, the area's landscape and unparalleled heritage values have underpinned food production, hospitality and tourism, while ensuring fresh produce for the Sydney markets.

"The destruction of that local economic bedrock is making it ever more difficult for local businesses and farmers – growers are particularly exposed to this phenomenon – and as each one succumbs to those difficulties the developers move in.

"The landscape is destroyed, old buildings demolished and the bedrock even further eroded."

The PM’s comments urging Australia to embrace the rapidly increasing Asian middle class has been slammed by farmers and industry experts, who say current regulations are hindering the sector, not helping it.

Other experts have pointed out it would be irresponsible to rely on the income from exports to Asia, as the region already has plans in place to feed itself.

Some of these plans include buying up some of Australia’s prime agricultural land, to grow food to send back overseas, a move that has been widely criticised throughout the country, leading to calls for a public register of land ownership and a cap on foreign ownership.

The industry is also struggling with lower than ever employment, with young people looking towards the mining industry rather than agriculture, and family farms being sold as they struggle to make a living in the current retail environment.

Agriculture degrees across the country are closing as enrolment numbers plummet and considering the average age of an Australian farmer is 62 and primary school children think yoghurt grows on trees, the future of our farming industry is looking pretty bleak and requires urgent attention now if it’s to be there for future generations.

Finding a unique path for Australia’s manufacturing future

As the manufacturing landscape shifts in response to new economic and social pressures, Australia is looking for an answer to the question: What does the future look like for Australian manufacturing?

By virtue of my role as the Director of the Future Manufacturing National Research Flagship at CSIRO, I am often confronted by this question. Many commentators and peers expect a simple answer, but that would be underestimating the complexity and diversity of manufacturing, both in terms of challenges and opportunities.

The recent work undertaken by the Prime Minister’s Manufacturing Task Force and other commentary is beginning to create a picture of what the future could (or ought) to look like for manufacturing in this country.

Irrespective of the wide-ranging views on what alternate futures for manufacturing might look like, Australian manufacturers need to be competitive in global markets and be highly productive and sustainable in their business operations. Manufacturing firms also need to capture the opportunities offered by Australia’s comparative advantage in natural resources in minerals and agriculture, as well as emerging markets for products and services that support more sustainable living in transport, construction, energy, health and well-being.

As part of its contribution to the Task Force, CSIRO has done an analysis of global mega-trends and identified a number of drivers that are already shaping the future of manufacturing in Australia. They include the rise of a new digitally-driven infrastructure, a move towards mass customisation, an emphasis on sustainability and the need to produce more from less.

Over the next decade, success factors that will influence the competitiveness of Australian manufacturing firms will include the need for faster discovery and development to respond more quickly to dynamic markets, advanced design to create much more competitive and sustainable products, improved collaboration across our innovation system to maximise the exchange and transfer of knowledge, an increase in our ability to leverage our national broadband infrastructure, and encouraging a better understanding of supply chains.

Another key success factor will be our ability to develop, adapt, adopt and integrate the right enabling technologies that provide a competitive advantage for Australian manufacturing firms.

There are number of potential game changers in terms of enabling technologies and advanced capabilities. This includes additive manufacturing, assistive automation, advanced design and smart information systems.

Globally we have seen a major shift towards technology-led manufacturing focused on large scale industrial automation. In countries such as Germany, production lines are increasingly dominated by automated processes and robotics. More recently, China has embarked on a large-scale industrial automation program. However, we need to think about how such technological leaps work for Australia. We have our own unique manufacturing DNA, made up of tens of thousands of SMEs. This is very different to some other industrialised countries, where there are many more large scale manufacturing enterprises. Australian SMEs often find it difficult to embrace industrial automation because of cost and the risk of disruption to their production.

However, there may be other paths to large scale industrial automation. Simple repetitive tasks have largely been addressed by automation (robotics) in manufacturing environments. However, there are many complex tasks that still require human involvement; it may be these technologies that “assist” (rather than replace) human processes that may become more prominent in Australia. The emerging field of assistive automation may play an important role in the future of Australian manufacturing.

Additive manufacturing is a method of fabrication by layers that translates digital design information into prototype or production parts. Currently used mainly in prototyping, additive techniques are increasingly seen as effective for manufacturing highly complex parts and devices that are costly to make by conventional means. Manufacturers can potentially deliver more niche, high value, customised products and be competitive even by producing low volumes. This is important as Australian manufacturers operate in a relatively high-cost environment, and generally cannot compete by generating economies of scale. In the Australian context, the availability of high-speed broadband will also greatly assist the adoption of this digitally-enabled technology. However, much still needs to be done to adapt these relatively new additive processes to make them robust and cost-effective for mainstream manufacturing.

Design will become increasingly important part of the manufacturing value chain. Better design can lead to products with superior functionality and sustainability. For manufacturing firms, making the transition from pure production to being more service based, design thinking could also play an increasingly important role in innovation.

There is emerging evidence, particularly in northern European countries, that the adoption of design-led innovation is directly linked to increasing firm competitiveness. A number of European and Asian countries are looking to (or have already incorporated) discrete design-focused settings into their broader economic policies. In Australia, awareness of the potential application of design-based innovation is still in its infancy and will require both coordination and investment.

The application of Smart Information Systems has the potential to lift productivity, competitiveness and safety. For example, Smart Information Systems that provide a high degree of situational awareness can provide a much higher degree of automation for the remote control of equipment used to handle complex and potentially hazardous tasks. Smart Information Systems that are highly scalable and interoperable across various media also provide the platform for intelligent collaboration networks that can assist in helping firms and research organisations innovate through more effective sharing of information.

There is no doubt that Australian manufacturing will need to take its own path to innovation and maintaining its competitiveness. Global influences will play their part, but Australia’s unique manufacturing DNA, natural resource endowment and increasingly strong communication infrastructure will help shape a uniquely Australian manufacturing future.

Swee Mak does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

The Conversation

This article was originally published at The Conversation. Read the original article.

Gov releases manufacturing taskforce report

The Government has released its Manufacturing Taskforce report, which has a five point policy designed to get the manufacturing industry moving again.

The report, released today, states that it "looks to shape a more dynamic contribution from manufacturing over the medium term to longer terms", adding that there is an "urgent priority that needs to be given to addressing the immediate challenges faced by businesses and employees".

The first point the report lays out is addressing these challenges and "the real and imminent danger of large losses of jobs and capabilties".

It also looks "to help reboot economy wide growth, encourage investment, and reduce the costs of doing business" via a targeted stimulus and initiatives such as new regulation and taxations have also been proposed.

The report also seeks to address competitiveness issues in the market, putting forth "the development of globally oriented innovation precincts".

This report also outlines the need to "address the multiple barriers facing SMEs, and to help more SMEs grow into mid sized firms".

"The agenda proposed here is a complex one. It will require sensible sequencing and the engagement of multiple stakeholders. Notwithstanding the urgent pressures on parts of manufacturing, the non-government members of the Taskforce stress the need to get it done right rather than get it done fast," report states.

It goes in to say that the industry must focus on invention and innovation, with government assistance, if it is to succeed.

To read the report in full, click here.

 

Govt needs to stop Coles and Woolworths dominance: lobby group

The representative body for smaller grocery retailers in Australia are again calling on fairer competition in the sector, releasing a report outlining the consequences if regulators and governments don’t step in.

Master Grocers Australia (MGA)’s report “Let’s Have Fair Competition,” says the independent supermarket industry is at risk of being annihilated by the unabated growth of the duopoly, Coles and Woolworths, according to an industry report.

They say unless the Australian Government and the Australian Competition and Consumer Commission (ACCC) take action now, Australians will have no competition in the sector, leading to prices increases and the end of freedom of choice.

The report refers to the enormous growth of the chains in the last decade and how their massive market power has resulted from practices such as anti-competitive price discrimination, store saturation strategies and shopper docket schemes.

“We want a ‘fair go’ for the smaller independents. It’s time to take action against this powerful Goliath that is growing stronger every day,” Jos de Bruin, chief executive of the MGA said.

“If the Regulators sit back and do nothing to foster fair competition in the grocery and liquor retail industry, then the Australian consumer will literally pay the price in the long term.”

Food manufacturers produce growers and farmers have been warning of the same problems for years, but have been forced into silence in recent years as the power of the duopoly means those who do voice their concerns are punished with reduced shelf space or non-renewal of contracts.

The MGA also wants state and local governments to strengthen retail assessment criteria to prevent the major supermarkets from building oversized outlets in small towns that push smaller retailers out of business.

“The independent supermarket industry strongly supports competition, but we want fair competition because without it, there will be no one left to challenge the big retailers and they will become even stronger.”

Earlier today Australia’s largest bread maker, Goodman Fielder admitted its $1 private label bread deal with Coles was unprofitable and unsustainable and managing director Chris Delaney admitted it was “not a good investment and I wouldn't do it again if I had a choice.”

Coles only response on the issue came in the form of a written statement that seemed somewhat threatening in its attitude towards cost absorptions and contracts.

"Coles is happy to review any supplier requests for cost price increases that can be appropriately validated,” the Coles spokesperson said.

In reponse to the MGA report, Coles told Food Magazine "Coles is not in the business of opening unprofitable stores as the Master Grocers Association report claims.

"We only open stores where we believe there is customer demand for our offer.

"Some other points that might be of interest in the debate are store openings.

"Coles has 749 stores. IGA/Metcash (whom the MGA represents) have 1365 stores, and 700 Foodworks stores.

"Metcash’s 2012 annual report advises that they opened 58 new IGA stores in the last financial year.

"In the same period, Coles opened 19 new stores and closed 11."

A Woolworths spokesperson told Food Magazine that “given it’s an industry issue, you need to speak to the industry body,” and would not provide any further comment.

Food Magazine then contacted industry representative body the Australian National Retailers Association (ANRA) for comment, but received only a media release singing the praises of Woolworths and Coles.

"A report attacking Australia’s leading supermarket retailers has been rejected as long on accusations and short on facts, by Australian National Retailers Association (ANRA) CEO, Margy Osmond," it states.

“The Master Grocers Australia (MGA) report is designed to be as sensational as possible at the expense of two highly successful Australian companies, Coles and Woolworths,” Osmond said.

The MGA represents the IGA group of retailers and far from ‘fair competition’, what they recommend will tilt the playing field in their favour, at the expense of consumers, she said.

“It is time that IGA came out from behind this myth they are a small business – they have a substantial slice of the grocery and liquor market in Australia.

“Aldi, a foreign owned entrant to the market, has grown from zero to 300 stores in less than a decade, a clear indication of the demand and the level of competition.

“More regulation, as called for in this report will only damage companies that employ more than 300,000 Australians and support hundreds of local businesses.

"The major chains play a critical role in regional communities where they represent jobs and cheaper prices for local consumers.

“The Australian supermarkets are leading the charge to bring the lowest possible prices to consumers, while still supporting local growers and manufacturers.

"Australian families struggling to cope with cost of living challenges like increasing electricity prices benefit from the price cutting competition that exists between the major supermarket chains.

“To suggest that Coles or Woolworths are deliberately establishing loss making stores to limit local competition is a nonsense. It does not make good business sense.

“This IGA-inspired report suggests that Australian shoppers need the Government to make their decisions for them and tell them, where, when and how they can shop.

"Nothing could be further from the truth,” Osmond said.

When we contacted a representative from ANRA to discuss the impact of the supermarket price wars on Australian workers and families who are out of business due to the duopoly, Food Magazine was told they did not speak about the pricing and operations of the business and we should go back to Woolworths for responses.

Here at Food Magazine, we are always hearing the shocking stories from manufacturers, farmers and suppliers about the impact of the supermarket duopoly’s power, but so few are ever willing to go on the record with their complaints.

The Senate Inquiry struggled to get anyone to speak up, because they were afraid of the consequences, we suffered the impact of the same fear campaign in organising the Food Magazine Industry Leaders Summit and Coles and Woolworths continue to maintain that what they are doing benefits their consumers.

Unfortunately, it is putting more Australians out of work as facilities move offshore and companies go bust.

Food Magazine was also told by a Coles representative that more favourable coverage of the supermarkets would result in more requests for comment being returned, but we are not willing to bow down to any form of bullying.

Do you agree with us that we need a Royal Commission into the supermarket powers? 

Migration bill will hurt us: produce industry

Australia’s largest representative body for the produce industry has slammed a draft migration bill, saying it shows the federal government will unnecessarily target the industry.

Ausveg says the Migration Amendment Bill 2012 released last week by the Minister for Immigration and Citizenship, the Hon. Chris Bowen MP, will negatively impact one of Australia’s most important industries.

“Federal Government plans to target growers under immigration reforms that are manifestly unfair,” AUSVEG said.

While the government maintains that the new laws aim to deter and punish employers who hire illegal workers, Ausveg says their concerns are unfounded.

“Illegal workers undermine the integrity of Australia’s migration program, reduce work opportunities for Australians, and expose vulnerable workers to exploitation,” Minister for Immigration and Citizenship, Chris Bowen, said.

Ausveg said heavy reliance on foreign workers for seasonable work through labour hire companies is vital to ensuring the profitability of the industry and that the draft Bill is unfarly targeting the produce industry.

“These workers must adhere to strict visa conditions in order to work legally on Australian farms, however, the proposed Bill appears to place additional responsibility with vegetable growers to double check the legalities,” Ausveg chief executive Richard Mulcahy said.

Image: The ABC

Breakfast cereal alliance to improve industry and consumer health

The Australian Food and Grocery Council has formed an alliance of Australian breakfast cereal manufacturers to develop health and nutrition changes for the industry.

The Australian Breakfast Cereal Manufacturers Forum (ABCMF) members produce about 80 per cent of all breakfast cereals purchased in Australia.

Companies making up the alliance include Freedom Foods, Kellogg Australia, Carmens, Nestlé Australia, Popina Foods and Sanitarium.

The Forum aims to improve consumer understanding of breakfast cereals by being proactive in emphasising the benefits of breakfast cereals, engaging in a positive dialogue with stakeholders and consumers and highlighting the benefits of breakfast cereals and correcting misinformation.

The Australian breakfast cereals industry has received praise recently for its proactive approach to health, particularly in the reduction of sugar and sodium levels.

In June it was revealed Kellogg Australia’s commitment to reduce sodium content across its products by 20 per cent had already been met, eight months ahead of schedule.

AFGC Chief Executive Gary Dawson said the ABCMF will provide evidence-based, practicalinformation for Australians on the benefits of breakfast cereals.

“Through continued education, the ABCMF aims to improve consumers understanding of the important role that breakfast cereal can play as part of a healthy, balanced diet,” Dawson said.

“A healthy start to the day is important and breakfast cereals represent the most cost effective, nutritious way to get your day off to a good start.

Australia’s breakfast cereal products market in is worth over $1.2 billion in retail sales per annum and employs approximately 3000 people, many in rural and regional areas.

“All forum members manufacture locally for the Australian market and rely almost exclusively on Australian grown grain, Dawson said.

“The ABCMF will provide category wide, evidence based information on breakfast cereals to media, stakeholders and consumers.”

Kerry closing Melbourne ingredient factory

Ingredient maker Kerry is closing its manufacturing plant in Melbourne, leaving up to 100 employees out of work.

The National Union of Workers says the Ireland-based company will move at least 75 per cent of its production to Asian factories.

The Altona factory, in the Melbourne’s west, will close for the last time on March 31 2013, and the production of products including bases for milkshakes, donuts and biscuits to Malaysia.

“These are high-wage jobs, high skilled jobs and they were good quality middle class jobs in the western suburbs,” National Union of Workers secretary Tim Kennedy said.

“The problem for these people is that the work for them in the future will be casual work here and there.

“There is just no confidence in the manufacturing industry in Victoria.”

Kerry’s factory closure is further indication that the manufacturing sector in Australia is struggling more than ever, he said.

 

“This is not just a job emptying bins at the footy,” he said.

“Some of the equipment is going to New South Wales but the bulk of it, about three quarters is going back to Malaysia.”

Kerry Group says some employees impacted by the closure would be offered jobs at the company's New South Wales and Queensland operations.

"Whilst manufacturing remains a very competitive environment in Australia and international markets, these decisions enable Kerry to provide sustainable business growth by leveraging the offering at our existing sites within the region," Kerry Ingredients and Flavours Asia-Pacific president Mark McCormack said in a statement.

"Whilst Kerry will continue to invest in and expand our presence in Australia, this is a consolidation of a number of acquisitions made over recent years."

"We'll now be focusing on redundancies and making sure that happens promptly and it happens well, and we'll also be looking at reskilling and retraining the workers."

Little World Brewers boosts sales by 26pc

Little World Beverages (LWB), the boutique beer company recently acquired by Lion, has delivered a 26 per cent growth in profits, an achievement which is sure to impress its new owner.

The result is likely to be LWB’s last result as a public company and the maker of the Little Creatures, White Rabbit and Pipsqueak said strong external beer sales have boosted the sales.

The company has achieved $11.6 million net profit for the year, significantly up from last year’s $9.2 million, an enviable feat in the struggling Australian beer market, which has seen beer sales had drop by 4 per cent in volume.

Craft beers, such as those brewed by LWB, are rising by up to 20 per cent, according to Chief executive Ross Sudano.

"We're in a segment of the market where we have got great engagement with consumers and they're demanding more," he said.

“The success had been fuelled by increased distribution and "pull-through" marketing which created customer demand through brand awareness.

Beer sales were almost entirely the reason for the 22 per cent increase in revenue to $85.8 million, he said.

It is expected that LWB will commission a new brewery in Geelong in early 2013, which is expected to ultimately double output.

In June, Japanese-owned Lion submitted an offer to acquire the company, valuing it at $382 million and shareholders will vote next month on the $5.30-a-share offer.

Sudano some consumers have expressed disappointment in the buyout, but it has not impacted sales.

"A lot of consumers are waiting to make sure nothing changes, particularly around the product profile, which it won't,” he said.

"Then it will just be business as normal and they will forget who owns us, I think."

Image: Sydney Morning Herald

Nestlé Indian factory expansion to create 250 jobs

International food giant Nestlé is making some changes to its businesses in India and the US.

The capacity of its Goa factory in Indonesia will be expanded as part of a three-year US$125 million investment plan in the key emerging market.

Switzerland-based Nestlé said the factory improvements will create 25o jobs.

 “We have been in India for 100 years and have factories in eight locations across the country,” Jean-Marc Duvoisin, global head of human resources at Nestlé said.

 “India is important for us and we have deep roots here."

In the US, Paul Grimwood, Chief executive of Nestlé UK & Ireland, has been appointed to the role of Chairman & CEO of Nestlé USA.

The appointment comes after the current chairman and chief executive Brad Alford, announced plans to retire in October this year after 32 years with the company and seven as chairman and chief executive.

Grimwood has been in his current role for over three years and prior to that, was the head of the  Nestlé UK Confectionery business for three years.

Can Coles and Woollies change public perception of private label impacts?

Despite apprehension about the impact of supermarket private labels and forecasts showing they will dominate shelves in the next five years, Woolworths has attempted to calm the market by releasing information on its range on its website.

Business information research firm IBISWorld has forecasted that the share of private-label products will account for over 30 per cent of all Australian supermarkets sales by 2017-18 and according to IBISWorld’s General Manager (Australia), Karen Dobie, they have been one of the industry’s fastest growing segments over the past decade.

“In 2007-08, private labels accounted for just 13.5% of total supermarket sales – meaning the segment has grown by more than 85% over the past five years”, Dobie said.

Recent studies found that one in four products purchased in Australian supermarkets are private label, and of those, one in two is imported.

The increase in private label

The debate over private label continues to rage, and the impact of the reduced shelf space afforded other companies has led to countless manufacturers and farmers going out of business.

As both Coles and Woolworths appear to be delivering on plans to double private label products in store by 2020, the availability of anything other than private label becomes far less.

Consumers have little choice but to buy private label, as other brands are replaced by supermarket imitations, and according to IBISWorld data, Australians will spend over $21 billion on private label products in the 2012-13 period.

This is already a huge increase from the $19.7 billion in 2011-12, and an even bigger increase from the comparatively tiny $9.96 billion five years ago.

By 2017-18, Australian spending on private label products is expected to hit $31.8 billion, according to Dobie, which is already a 50 per cent growth from five years ago.

“The recessive economic climate has been a strong driver of private-label growth.

"Households have been reining in spending, paying off debt and increasing savings,” she said.

“This, coupled with an increase in the range of private-label products available, has led many consumers to make the shift to home brands.”

“Branded producers have responded to private-label growth by discounting their products to remain competitive.

“However, the dominance of Coles and Woolworths means that they are likely to give preference to their own brands in terms of spacing and design allocations – placing continued pressure on the big brands.

“This can be detrimental to branded producers as their share of shelf space is eroded by home brand products.

Woolworths attempts to address concerns

To address the competition between supermarket private label products and supplier brands, Woolworths has released an Official Range Profile of brands for its Australian supermarkets.

The supermarket giant said the data will be regularly updated on its website and will allow for a “more informed” discussion on choices between private label and branded rpoducts.

Managing Director of Woolworths Supermarkets, Tjeerd Jegen, said Woolworths wants to  demonstrate how they meet their customers’ needs.

“As part of that commitment, we are releasing a snapshot of data about our range to the market to put our business into a correct perspective,” Jegen said.

“The facts show that in packaged groceries and perishables, Woolworths stocks more than 44,000 lines of which 94 per cent are branded products.

“Just 2,500 are Woolworths Own Brand products,” he said.

Complete dominance

While the supermarket is maintaining that their range is heavy in branded products as a way to alleviate debate on the issue, it does not change the fact that the supermarket duopoly is gaining more control of the market all the time.

The Senate Inquiry set up to investigate the anti-competitive practises of the major supermarkets struggled to get people to speak up, and while many will speak of the record, few will go public with the stories of the power the supermarkets’ wield.

There have been calls for an ‘Australian-made’ aisle in supermarkets, a cap on the percentage of private label products that can be stocked and restrictions on the market share the supermarkets can have.

However, while the awareness about the impact of the price wars, particularly on Australian dairy farmers is becoming more widespread, the supermarkets continue to maintain they aren’t doing anything wrong, but are instead encouraging companies to innovate and looking out for their customers.

We invited representatives from both Coles and Woolworths to attend our Food Magazine Industry Leaders Summit in June, but because there was one discussion topic, out of a total of six, planned on the impact of the supermarket price wars, we were told they had “no interest” in being involved in what they called a “get the supermarkets” agenda.

When Food Magazine reported on Coles’ failure to respond to more than 73 000 consumers who had “liked” a post on Facebook detailing the impact of the reduced price milk, we received a call a Coles representative, who wanted to point out that they did respond, albeit three days late and to the wrong person.

Food Magazine was accused of being biased towards food manufacturers, but since  this representative from Coles does not usually return Food Magazine’s phone calls, we pointed out that does make it difficult to report from both sides.

We tried to come to an agreement that when we called for comment on stories, he would respond, and Food Magazine, in turn, would provide their perspective on all such stories.

However, he would only agree to this arrangement if we started reporting more favourably on Coles, saying he would “closely observe” the news section to see if we were doing so, before he agreed to participate in stories on the supermarket price wars.

Unfortunately for the supermarkets, we can’t be bullied into behaving the way they would like us to and will continue to report the true realities of the supermarket environment for food manufacturers and producers.

Do you think there needs to be limits on market share of Australian supermarkets? Do you buy private label? 

UK dairy farmers continue blockades to overturn price cuts

Despite three milk processors ending plans to cut the farm-gate price for milk, farmers in the UK have pledged to continue blockades of processing depots until all price cuts are rescinded.

“We will continue the protests at depots until everyone has rescinded the price cuts,” David Handley, chairman of Farmers For Actions (FFA) said.

“We also want to track the money that was taken from us in May/June.

“We have given them four weeks to show us their accounts so we can see where the money went and we want some of it back.”

Protesters wave goodbye to a milk tanker which is forced to turn around and leave the Dairy Crest milk processing at Foston, Derbyshire after farmers blocked entrances with their tractors.

 

The UK dairy farmers are suffering similarly to their Australian counterparts, and have been calling for the price cuts to be abandoned, as they are left unable to break even on their operations due to the low farm-gate prices.  

Farmers and the FFA have been blockading plants since last week, over what they say are unnecessary cuts.

“The decision too reverse the price cuts totally vindicates our action and shows there was no need for what they did,” Handley said.

Do Aussie farmers need to embark on similar action to get a response from our major supermarkets? As we reported earlier today, Coles has failed to respond to more than 73 000 consumers who are concerned about the impact of the milk price wars.

Coles doesn’t respond to 73 000+ consumers concerned about milk price wars

A concerned consumer’s post on Coles’ Facebook page about the impact of its price cuts on farmers has gained more than 73 000 “likes” over three days, but the supermarket giant is yet to respond, despite constant declarations that customers and farmers are its main priorities.

On Friday, Jane Burney posted a heartfelt summary of the supermarket price wars effects on ordinary Australians.

Dear Coles,

Your $1 per litre of milk deal is killing the lifeblood of our dairy industry. The ramifications of it are finally rearing their ugly head. Dairy Farmers has announced it's price for Tier 2 milk at 13 cents per litre. This is not sustainable in an industry where costs of production can be as high as 30 cents per litre. The consumer is paying $1 a litre and the only winner here is the supermarket. It is time for us to go back to the old fashioned way; in which we bought real milk that tastes like milk; no permeate and where our fruit and vegetables were grown in our beautiful country. Stocking garlic from China, Argentina. What is going on? Obviously it is cheaper to buy it from overseas then from our country; grown in God knows what. And for our farmers and the towns they support and encourage capital growth; it is heartbreaking. Your latest ad campaign sprouting that you support Aussie growers in insulting. You are misleading the public in how you support Aussie growers. Not only have you ruined the fresh milk market but you have also lowered the price on your cheese and butter. The only winner here is you. Eventually all the Aussie growers you so called support will be out of business. Dairy farmers who work 7 days a week, 14 hours a day, who have been dairy farming their whole life, whose cows are their whole life will have to stop farming as it is no longer economically viable to continue. Our "fresh"produce will be flown in. The consumer will be stuck buying expensive, overseas produce. What will happen to our economy and our country towns? I urge people to think about what they buy. The more Australian made produce we buy, the more our money stays here and benefits us. Your $1 milk is a nail in an already suffering coffin. I am ashamed to watch you ads and us farmers burn in resentment when we do so.”

Over 4 500 people have commented, supporting Burney’s position about Coles’ decisions, and more than 73 000 have “liked” the post.

But just like its other notable social media fail earlier this year, Coles has failed to respond to the outpouring of support for Aussie farmers and disdain for the supermarket giants actions.

Not the first social media fail for Coles

In March, the supermarket giant copped criticism from consumers, who insisted it stop ripping off farmers and profiting from pokie machines.

"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,” while others shared similar concerns about farmers and Australian workers.

The impact of $1 milk

After Coles cut its retail milk price to $1 a litre in January 2010, the flow-on effects of the decision have continued to damage the sector.

“In NSW, my state, I see farmers being asked to sign contracts for three cents a litre than their previous contracts,” Terry Toohey, Australian Dairy Farmers Director said at the Food Magazine Leaders Summit.

“This will have astronomical effects on fund and profit margins.”

"In my case I'll have 40 per cent of my tier 2 of milk [purchased] at 18 cents [per litre]. 

"The cost of producing it is 40 cents [per litre]. 

"So, you start to look and say, I'm only one person, there are 800 dairy farmers in NSW alone."

The current practice is for milk companies to announce what is known as an Anticipated Full Demand (AFD) to Dairy Farmers Milk Cooperative (DFMC), which is bought at a somewhat reasonable price and referred to as Tier 1 milk.

Any milk deemed ‘surplus’ is then paid at a much lower price and referred to as Tier 2 milk.

However, the buyers of the milk produced on Australian farms are deliberately underestimating the amount of milk that each can deliver, meaning they are not obligated to buy a considerable portion of the milk they know a farm will produce at the reasonable price.

There is no transparency at farmer level as to what Tier 2 milk is being sold to other processors for.

"The retail actions are certainly impacting the dairy farmers in a negative way, this combined with the uncertainties and other factors [impacting] dairy or other farming, it's making it unattractive for the next generation, because it's not profitable for my children,” Toohey said.

"If I was old and had children ready to take over the farm, I will tell them blue in the face not to come into agriculture. 

“And that's pretty sad after 107 years on the one farm."

And as farmers leave family farms because they can’t make enough money to survive and Australian food manufacturers continue to go bust because they can’t meet supermarket expectations, Coles recorded a three per cent growth in sales on Friday.

Update: Coles contacted Food Magazine this afternoon to inform us that they did, in fact, respond to the comment posted on Friday afternoon, at 7am this morning.

The supermarket giant did not actually respond to the original comment, but rather one of the many Facebook users who have re-posted the original comment.

They said: Hi Brent, we are committed to paying a fair price for our milk and actually increased the prices we paid to processors before we cut fresh milk prices in store last Australia day. This meant that processors did not have to reduce the price they pay to farmers. Helping Australian families buy more Australian milk is good for the dairy industry. We also have to disagree about importing fresh produce because we only import when products are not available in Australia. We call this our “Australia First” policy and it means that 100 per cent of our fresh meat, all our milk and 96 per cent of our fresh fruit and vegetables are grown right here at home. Why not take a look next time you are in store.”

What do you make of Coles' comments? Do you agree with the original comment posted on Facebook?

 

 

Katter criticises National Food Plan, Coles returns fire

Bob Katter’s criticism of the National Food Plan (NFP) has been slammed by Coles, but many of his suggestions would drastically improve the current food industry if they were implemented.

The government released the discussion paper on the NFP, which examines consumer concerns regarding food safety, land use and foreign ownership, last week for public consultation.

One of the key recommendations of the paper was implementing steps to improve relationship between suppliers and supermarkets, and the Queensland MP has declared his support for the move.

In a statement to media last week that discussed foreign investment in Australia and the supermarket domination, Katter predicted that within three years Australia would be a net importer of food and “unable to feed ourselves”.

His comments are not at all outlandish, considering other industry experts, including union members, food companies and produce growers have all said the same thing in the last year.

If elected, Katter’s Party would create legislation that would impose labels on imported produce with potential health hazard warnings (as chemicals used in foreign farms have often been banned in Australia for decades) reduce the duopoly’s supermarket share to no more than 22 per cent and return arbitrated prices for milk.

Katter says that reducing Coles and Woolworths’ market share would drastically improve the rights of farmers and small business “against the might of a supermarket share concentration, unseen anywhere else in the world”.

“The Americans are screaming blue murder because WalMart and their competitor have now reached 23pc market share,” he said.

“Here we have two supermarkets with 92pc; so if they decide to cut down the amount of money they are going to pay farmers, they can, because there is no competition.

“On top of this, they are bringing in product from overseas, yet it has been revealed that the Chinese are putting formaldehyde into cabbages.

“And we all know that the antibiotic streptomycin is being used on foreign-grown apples to fight fire blight; and that water contaminated with raw sewage is being put in overseas prawn farms.”

Katter called on all Australian farmers to appeal to their local MP’s to vote for the measures his party is putting forward.

“It’s fighting time,” he said.

“This country will no longer accept a pell-mell rush into not being able to feed itself.

“And this country will not accept a continuation where two giant supermarket chains are able to cut the price to the supplier and increase the price to the consumer, because there is no free market where there is a duopoly.”

Coles Corporate Affairs general manager Rob Hadler said Katter's criticism of the NFP should be ignored, saying it is “xenophobic fearmongering, old-fashioned jingoism, protectionism and false claims about our national food situation”.

While he argued that  Australia has been a net food exporter for well over 100 years, he admitted that ensuring we maintain that position for coming decades would only happen  “if we get the right policy settings in place”.

“Our strong belief is that a strong and competitive domestic food production system is required to support export growth in the longer term,” he said.

“Coles has an ‘Australian first’ sourcing policy that gives preference to Australian grown and made products where they are available.”

But as food manufacturers, producers and farmers will tell you (off the record), while the supermarkets pledge to source food locally, the prices they pay are not sustainable for the future, although Hadler denies this.

“Coles has funded lower prices from being more efficient, not by squeezing farmers and food manufacturers,” he said.

Katter also slammed the increase in foreign investment, saying it is tragic that the government will sit down and talk with Chinese interests but won’t do the same with Australian farmers.

“It is a great tragedy indeed that we have to sell our own country out to get any investment in food production.

“The average Australian may well shake their head – we’ll sell our country off to the Chinese but not develop it ourselves.”

UK dairy farmers protest price cuts

Dairy farmers in the UK who are facing similar price cut impacts as Australian farmers have vowed to continue protesting about the returns they receive.

UK dairy manufacturers and farming groups, including the National Farmers Union, signed a draft deal yesterday to adopt a voluntary code of practise to oversee relationships in the dairy industry.

The agreement comes after talks organised by the UK government as well as protests and blockades from farmers at retail and processor sites.

Farmers have taken aim at processors including Asda, Morrisons and Robert Wiseman Dairies after they announced plans to cut prices on 1 August.

Farmers for Action chairman David Handley said the organisation will be "relentless" in its pressure to reverse the planned cuts and to push retailers to pay more for their milk.

Government involvement

Earlier this month UK Prime Minister David Cameron announced that the government will spend £5 million (AU$7.6 million) on a program to improve competitiveness for dairy farmers.

The NFU and dairy industry body Dairy UK agreed to "heads of terms" for a code of practice yesterday, which includes initial agreements to set minimum requirements for contracts between farmers and processors.

Handley is doubtful the code of practice will work and said the Government should consider legislating to ensure fair prices and treatment of farmrs if the code fails.

"We've got to start somewhere [but] I personally have my doubts of whether the voluntary code will work," he said.

"We've got to do is convince the minister that we are prepared to give it a try on the understanding that, if after between three and six months, it has clearly been shown not to work, they have to go for legislation.

There is no way that this industry can be allowed to get back to this situation ever again.

“Every 18 months to two years, somebody is trying to cut the milk price.

“We've got to start somewhere but I have grave reservations, knowing the people that are in this industry that are in the supply chain of dairy."

Aussie farmers suffeing same issues

The problems being faced by dairy farmers in the UK are all too familiar for Australia’s own dairy farmers.

After Coles cut its retail milk price to $1 a litre in January 2010, the flow-on effects of the decision have continued to damage the sector.

“In NSW, my state, I see farmers being asked to sign contracts for three cents a litre than their previous contracts,” Terry Toohey, Australian Dairy Farmers Director said at the Food Magazine Leaders Summit.

“This will have astronomical effects on fund and profit margins.”

"In my case I'll have 40 per cent of my tier 2 of milk [purchased] at 18 cents [per litre]. 

"The cost of producing it is 40 cents [per litre]. 

"So, you start to look and say, I'm only one person, there are 800 dairy farmers in NSW alone."

The current practice is for milk companies to announce what is known as an Anticipated Full Demand (AFD) to Dairy Farmers Milk Cooperative (DFMC), which is bought at a somewhat reasonable price and referred to as Tier 1 milk.

Any milk deemed ‘surplus’ is then paid at a much lower price and referred to as Tier 2 milk.

However, the buyers of the milk produced on Australian farms are deliberately underestimating the amount of milk that each can deliver, meaning they are not obligated to buy a considerable portion of the milk they know a farm will produce at the reasonable price.

There is no transparency at farmer level as to what Tier 2 milk is being sold to other processors for.

Supermarkets have too much power

"The retail actions are certainly impacting the dairy farmers in a negative way, this combined with the uncertainties and other factors [impacting] dairy or other farming, it's making it unattractive for the next generation, because it's not profitable for my children,” Toohey said.

"If I was old and had children ready to take over the farm, I will tell them blue in the face not to come into agriculture. 

“And that's pretty sad after 107 years on the one farm."

Toohey said the current practise on Australian soil were based on the Tesco model in the UK, which has caused indescribable pressure on the industry over there and is having the same impact here.

“Given the sheer size of the supermarket duopoly, over 75% of the market is between the two powers and they are wielding that power over the Australian marketplace, and the majority of Australian suppliers, particularly to the fresh food industry.

“In the United Kingdom, they have already experience this and I say you’ve all read that this is a Tesco model – the people that have been brought in by Coles have come from Tesco.

“I was over there, I had to go over there to do a study 4 years ago, and I came back with an alarm bell saying, ‘it’s not what’s going to happen in Australia, it’s when it’s going to happen in Australia.’

“But what has happened over there [has] been going on for 12 years and the government has stepped in, and we’ve seen a turnaround.

“But it’s plugging a hole in a boat, but the hole is that big, and it’s nearly too hard to plug.

“And I believe that’s where we’re going at the moment.

“At least the Titanic was going forward but it sunk, I don’t know about the dairy industry.”

An investigation by the Australian Competition and Consumer Commission (ACCC) cleared Colesof any wrongdoing in the case, and a Senate enquiry also found the supermarket was not putting dairy farmers at direct disadvantage with the pricing, but Australian Dairy Farmers Association president Chris Griffin told Food Magazine after the report was released that the Senate failed to address the real issues when it produced its findings, and farmers have continued to leave the industry in droves.

Another Senate Inquiry into the power of the major supermarkets struggled to convince people to speak out about the behaviours of the major supermarkets, too afraid to speak up for fear of the consequences.

Do you think we need more government involvement to help our struggling dairy industry?

Here at Food Magazine, we think there needs to be a Royal Commission into the supermarkets’ actions. What are your thoughts?

 

Outback QLD land to be irrigated to meet ‘foodbowl’ demand

The Queensland Government has announced plans to irrigate fertile land by using two untamed rivers out of the Gulf of Carpentaria, as plans to become Asia’s foodbowl take shape.

Prime Minister Julia Gillard announced earlier this year that the only way forward for Australia, in economic and agricultural terms, was to commit to becoming the ‘foodbowl’ for the rapidly rising Asian middle class.

The idea has been slammed by many within the industry, who say the PM is out of touch with reality and that current regulation is hindering the farming industry, not helping it, while others argue that Asia has already taken steps to ensure it will be able to feed its own people.

Some of these steps include Asian companies buying up prime agricultural land, leading to calls for a public register of ownership and a cap on the number of non-Australian that can invest in agricultural land.

On Friday a government report defended foreign investment in prime Australian agricultural land, and argued that the only way forward for the country is to embrace the rising Asian middle class.

The green paper for the National Food Plan has forecasted a rise of almost 80 percent rise in demand for food by 2050 and believes Australia should embrace the opportunity.

Under the outback Queensland plan, graziers and farmers are hoping to turn the black soil country lining the Flinders and Gilbert rivers into a hub for growing water-intensive crops including rice, cotton, beans and corn, according to The Courier Mail.

Up to 10 000 hectares of land would be opened up to irrigation under the plan, with 80 000ML coming from the Flinders and 15,000ML from the Gilbert in unallocated water reserves.

At an irrigators' forum at Hughenden yesterday, Queensland Natural Resources Minister Andrew Cripps said a that the decision provided a balance between economic development and water resource management.