Australian entrepreneur Dick Smith will front the Senate Inquiry into the food processing industry and supermarket dominance today.
The Inquiry has come up against problems getting people and companies to participate in the process, as the supermarkets bully them into silence through their market control.
Smith is one of the few who is openly critical about not only the anti-competitive practises of the supermarkets, but also the government policy that is ruining the entire Australian food industry.
The case against ALDI
He has taken a slightly different angle in his submission to the Inquiry, effectively blaming foreign-owned supermarket ALDI for most of the problems in the supermarket sector.
“ALDI’s lower prices primarily come from having lower labour costs, that is, they employ less Australians,” Smith writes in his submission.
“When Coles and Woolworths follow this particular trend, (as they will be forced to) where in a large supermarket you might only have one or two Australians employed our food prices may be slightly cheaper but in the long term our taxes will very likely go up to pay for the social services of people who no longer have jobs.
“When ALDI stocked a limited range of products there was hope that the Australian owned retailers could survive because they could sell the other necessities that were required, place a higher price on those and obtain an extra margin to cover their extra staffing overheads.
“The alternative was to go broke.
“That’s now all changed.
“ALDI have announced that they are going to increase their product range so a typical Australian family can buy all of their products in an ALDI store.
“This will result in Coles and Woolworths either following ALDI further on this lower cost, 90% private label, “lack of choice” model or losing substantial market share and eventually failing.”
Woolworths and Coles are already increasing their private-label products at a rapid pace, pushing Australian companies out of business and placing unfair demands on producers and transporters.
Supermarkets killing drivers
Yesterday the Transport Workers Union (TWU) accused the major supermarkets of causing road deaths by forcing truck drivers to drive for unsafe lengths of time and meet unrealistic deadlines.
"The union is saying very clearly to Coles and the other retailers that [their] practices have to change, that they are literally killing people on our roads because of the economic pressure," TWU federal president Tony Sheldon told ABC News.
"What happens with Coles and other major retailers with dominating the market at 32 per cent of road transport tasks, is that they say to manufacturers, they say to farmers and they say to transport operators that you've got to do this work the cheapest and the fastest way you possibly can.
"They're price takers, which means the trucking industry either makes the decision to do the work or they don't have a job."
Collapse of Australia's beetroot industry
Smith points towards the beetroot industry as a prime example of the damaging impact the ridiculously low prices have on Australia.
“As an example, for many decades, a simple can of Australian grown beetroot has sold for about $1.50 in our supermarkets and this has allowed a viable farming and processing industry to exist,” he said in his submission to the Inquiry.
“The cost price of such a can is about 90 cents, the remainder being the supermarket overheads and profit margin.
"Not at any time in the past few decades have I heard of consumers complaining about the price of a can of beetroot.
“In fact, it’s about half the price of a cup of coffee and I find it truly amazing that it could be so cheap, considering that Australian award wages and conditions are included in the price.
“Notwithstanding the lack of pressure on price, ALDI started to sell beetroot at 75 cents a can. Immediately, Coles and Woolworths matched the price, as they had to.
“ALDI proudly claimed that the beetroot they were selling was from Australia however they did not state that this would basically sound the death knell to our beetroot growing and processing industry.
“Within a short period of time, Heinz announced the closure of its beetroot processing plants in Australia, sacking hundreds of workers and Australian farmers were ploughing their beetroot crops back in the ground.
“Heinz announced that their beetroot from now on will be grown and processed overseas.
“At the present time, there are still stocks of Australian beetroot at 75 cents a can, but it’s obvious that once these go, if the price is to remain the same, all beetroot in future will come from overseas.
“We will have lost a complete industry, but this didn’t happen because of pressure from consumers.
"This is an important point.
“It happened because one of the most astute examples of modern “extreme” capitalism, fully foreign owned ALDI, decided to flex its power.”
Smith said another differentiating factor between ALDI versus Coles and Woolworths is that the latter two are publically-listed companies, dependant on and accountable to shareholders, whereas ALDI is privately owned by a German company.
The “highly secretive” ALDI is therefore creating an uneven playing field, he said in his submission.
"Intentionally vague" labelling
He also takes aim at the labelling laws for country of origin, claiming they are deliberately misleading.
“The current food labelling laws in Australia are intentionally vague so the requirements are accepted by the large multinational companies who have political clout,” he said.
“Although there have been campaigns such as the “Australian Made” mark, this was in reality an indication that the majority of the cost of production of a product was made up with Australian content.
“For example, if the cost of a jar, a lid, label and an ingredient such as sugar represented greater than 50% of the total cost, but the primary ingredient (say, the strawberries in strawberry jam), was imported, the label could still state “Australian Made”.
“In more recent times many labels bear the words “Made in Australia from imported and local ingredients”. In this case, the local content may be very small.”
Smith’s own company, which produces food ‘as Australian as you can get” has felt the impact of the obsession with cheap, often imported food, and is personally watching his products getting pushed out of the market.
“Turnover peaked at $80 million per year in 2002 and has now dropped to $8million per annum as most Australians move to lower prices,” he said of his company, Dick Smith Foods.
“It’s interesting to note that the prime reason Coles have refused to stock our products is that they are about 30 cents more expensive, and they believe Australian consumers will not support this extra cost.”
A statement from Senator Richard Colbeck, the Liberal Senator for Tasmania who called for the Select Committee last year, said he is pleased that the Inquiry has secured both Coles and Woolworths to appear as witnesses at a subsequent meeting in Canberra next week.
The committee is due to release the findings of the Inquiry by 30 June.