Supermarket private label rip-offs the focus of ABC show

New ABC show, The Checkout,  will tonight focus on supermarket copycat products that are infiltrating the Australian grocery market.

According to a post on Mumbrella the show will  “examine the phenomenon of the major chains using packaging, design and colours similar to that of major FMCG brands.”

Mumbrella made a video on the issue in 2011 which shows the striking similarity of some private label versions to the name brand packaging.

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Private label has been a contentious issue with manufacturers such as Heinz, Four’N’Twenty  and the AFCG accusing supermarkets of deliberately milsleading customers with copycat designs. 

Whilst many companies may have a decent legal case for passing off or misleading consumers, many wont take action (or even talk to Food Magazine) for fear of losing the lucrative contracts with the big two.

Australian food manufacturers: Stuck between a rock and another extremely similar rock that’s a few cents cheaper.

The Checkout airs tonight at 8pm on ABC1

Another manufacturing company hits the wall: Starmaid Group

Plastics manufacturer, Starmaid Group, has been placed in receivership – the latest of several recent business collapses in the industry.

According to SmartCompany, Starmaid manufactures storage products and uses premium food-grade materials to manufacture plastic houseware and professional products across 50 brands, including Fresh Seal, Clea and Hobbibox.

PPB Advisory has been appointed as receivers and managers over the Starmaid Group, and is calling for expressions of interest in the business.

It's been a difficult 12 months for the manufacturing industry, especially food manufacturing, with a number of companies entering voluntary administration, including confectionery brands Chocolate Fare, and the iconic Darrell Lea, not to mention Gourmet Food Holdings – owner of Rosella.

Windsor Food Factory also announced its collapse earlier this month, closing its Cowra cannery and leaving many employees and local growers shortchanged.

The popular Byron Bay Cookie Company also entered voluntary administration recently, with one disgruntled supplier telling Food mag he's owed $30,000.

The high Australian dollar, cheap imports from overseas and the rising influence of the supermarket duopoly have all been listed as contributing factors to manufacturing's woes.

 

Jacob’s Creek forges on with premium transformation

Wine label, Jacob's Creek, is continuing with its efforts to upgrade to a premium-status wine, despite suffering a slide in sales in Britain.

Owned by the world's second largest alcohol company, Pernod Ricard, Jacob's Creek has suffered the loss of one million cases in sales in Britain, thanks to price hikes, reports SMH.

Despite this, the brand will be introducing new blends, engaging in strong advertising and has increased the prices of its entry-level wines by $1 a bottle in order to raise its profile in Australia.

Pernod chief executive Pierre Pringuet said Jacob's Creek sales in Australia have been stable despite the price rises, with the Reserve range in particular growing strongly.

"There had also been a 10 percent increase in its contribution to [Pernod's] profit, and is really a reflection that our value strategy is working," he said.

According to SMH, Jacob's Creek was once again named Australia's biggest-selling brand late last year, after three years of being trumped by cheaper and private-label options.

 

Strong dollar, private labels continue to squeeze Aussie winemakers

153-year-old Central Victorian winemaker Tahbilk has taken aim at cheap imports and private label brands for hurting local winemakers.

CEO Alister Purbrick said that house-brand wines were becoming a feature at independent retailers and not just stores owned by the Coles and Woolworths duopoly. Meanwhile, the persistently strong Australian dollar was making imported products more attractive.

''So you have got the double whammy of own-brand and imports taking space away from us, up go our promotional slot costs and there is less opportunity for us in any case,'' he told Fairfax Media.

Tahbilk’s domestic sales were down, and overall revenue declined from $13.675 million to $13.187 million. The CEO credited Tahbilk’s wine club with assisting the result while exports margins were squeezed.

''There is not a lot of margin in exports, so the best way to describe our exports at the moment is that we have them in a holding pattern,” he said.

“We are not going out aggressively to grow because we can't make margin out of it, but we want to maintain our presence in those markets.''

Recently d’Arenberg, another century-plus-year-old Australian winemaker, said their yearly result had been hit by the high dollar, with margins for exports whittled away massively by exchange rates.

 

Producers prefer dealing with Aldi

A number of grocery producers have spoken out – under the veil of autonomy – admitting they prefer dealing with Aldi over the supermarket duopoly.

According to SMH, the producers, who provide groceries ranging from fruit and vegetables to household products, said Aldi pays invoices faster and is easier to work with.

One supplier said Aldi absorbs losses on sales rather than reducing supplier prices or increasing costs, which both Coles and Woolworths are guilty of.

The producers' comments are in response to a dossier produced by Woolworths which claims that Aldi's presence has led to an increase in private label products and a more competitive market for grocery retailers.

The dossier also claims that Woolworths' market share has remained stagnant since 2007, while Aldi's has grown three percent since then.

It says that 95 percent of Aldi's products are private labels, but suppliers insist the German-owned chain still buys from local producers, even paying a premium to do so, and only asks suppliers to compete with other Australian suppliers, not international ones as is the case with Coles and Woolworths.

A spokesperson for Coles insisted the brand has an Australian-first sourcing policy, and usually only looks internationally when an Australian version isn't available or when consumers want an alternative choice.

The ACCC is currently looking into allegations the supermarket duolopy employs bullying tactics in its dealings with suppliers in order to drive prices down. 

 

AusVeg blames imports for Rosella’s closure

Vegetable producer lobby group AusVeg has said that the end of Rosella’s tomato sauce production is part of a wider trend in food manufacturing, which is being hurt by cheap imports.

Rosella’s parent company, Gourmet Food Holdings, which was put in receivership in November last year, has been unable to find a buyer and closed its Rosella factory last week.

“Rosella has been an icon of the Australian food sector since 1859 and its closure reflects the incredible pressure and adversity that our local food production industry is currently facing,” said Peter Mulcahy, AusVeg’s CEO, in a statement.

“Rising levels of imported product are threatening the viability of Aussie growers and placing our ability to feed ourselves as a nation in the future in danger.”

The vegetable group’s figures suggest that $908 million worth of vegetables were imported in 2011-12, double the amount in 2004-05 and a jump of 16 percent on the year before.

The supermarket duopoly’s increasing use of private label brands has been blamed by some, such as the AMWU, for GFH’s demise.

 

Growing concern over duopoly’s wine interest

Wine producers across the country are becoming increasingly concerned over the supermarket giants’ growing interest in the wine market.

Earlier this week there were reports that Woolworths has registered interest in the collapsed Barossa Estate Winery, and now Western Australian wine producers are fighting the supermarkets’ plans to open liquor stores in the heart of Margaret River.

Wine Industry Association of WA general manager, Aymee Mastaglia, told thewest.com.au that competition between Coles and Woolworths would drive prices down and overpower cellar doors and independent retailers.

Mastaglia said supermarkets often buy wine in bulk from wineries and bottle them in such a way that they look like they’ve been produced by boutique wineries when in fact they’re private label products.

"Even if consumers want to support local business, they often don't realise they are buying the supermarket's private labels," she said.

However, representatives from both supermarket chains said their liquor outlets would increase choice for consumers and support the local wine industry.

It’s a different story in South Australia, however, with the state government considering allowing the duopoly to sell wine, albeit on a limited basis.

While independent retailers have argued against such changes, Attorney-General John Rau said selling wine in supermarkets would match the state’s European-style culture, which places special attention on food and wine.

The government’s proposal would see wine makers sell their products directly from supermarkets, and would not include the sale of any other alcohol product, such as beer, spirits, casked wine or fortified wine.

 

Profit dip for pie maker

Intense competition inside supermarkets and the growing popularity of private-label foods has seen pie maker Patties Foods post a 16.5 percent fall in first half profits.

The company, which owns Herbert Adams, Four'n Twenty and Nanna's, made a net profit of $9.1 million in the six months to December, down from $10.8 million in 2011.

Along with increased competition Patties said it had been held back by manufacturing disruptions caused by installing a new packaging system and a $1 million charge on bad debt.

Fairfax Media reports Patties managing director Greg Bourke said the company would aim introduce a new line of frozen desserts to try and win back supermarket customers.

“The area where we are having the most impact on margin is our frozen fruit business,” he said.

“It is growing in the value end – increased value products rather than premium branded products.

“There is a change of mix going towards private label and also to the value range.”

Bourke said while the company was still selling the same amount into supermarkets, consumers had drifted away from premium products toward cheaper foods, which delivered slimmer margins.

He said the company had also seen strong growth in its petrol station and convenience store products, but the gains had not been enough to offset weakness in other parts of the business.

 

Product of the Year winners and consumer trends announced

Now in its fourth year, the annual Product of the Year awards were held at the picturesque Opera Point Marquee recently, and food brands made up almost half of the winners list.

More than 11,600 Australian household shoppers were surveyed by global research giant Nielsen as part of the awards, which now comprise 34 categories including Bakery, Dips and Dressing, Beverages and Specialty Biscuits, as well as a range of non-food awards such as Dental Care, Dishwashing and Hair Care.

Sixteen of the 34 categories are food-based Product of the Year director Sarah Connelly said innovative and creative manufacturers are rewarded with consumer loyalty.

"With an increasingly competitive market, manufacturers have significantly upped their game as they battle to capture consumer’s imaginations. They are striving to get the best, eye-catching products into the market, which is great news for shoppers," she said.

"Consumers are attracted to creativity that is relevant to their needs and the results reveal they are not averse to paying a little extra for this. The foodie trend is also evident in this year’s winners, showing that people are still more than willing to indulge themselves."

Winning food brands include Macro Gourmet Dips, Birch & Waite, Cadbury, Streets and Berri (full list of winners below).

Price is king
The Product of the Year research also found that consumers are still watching their hip-pocket, with home-brand products becoming increasingly popular.

Seventy percent said they often compare prices of private labels with manufacturer goods and many (60 percent) believe supermarkets offer similar quality, with packaging deemed just as good as those of branded products.

Ninety-four percent of respondents said they have bought private label goods, with half being regular users.

Price and convenience are king for consumers, even if it means compromising their health, the research found. Almost three quarters of Australians (74 percent) would eat healthier and buy more premium quality fresh produce if they were less expensive, with 41 percent believing it is cheaper and easier to buy pre-packaged meals rather than cooking themselves.

"Australians are time-poor and are looking for ways to cut corners, which means consumers are more likely to favour products that help make things quick and easy," Connelly said. "More than half of those surveyed (53 percent) said they don't have time to cook a full meal from scratch so they buy something convenient, even if it’s not as healthy."

 

Inquiry into supermarket bullying misses the real issue

 

The Australian Competition and Consumer Commission (ACCC) announced last week that it is investigating claims that Coles and Woolworths are bullying suppliers. The issue is serious, but the ACCC investigation only treats the symptom and diverts attention away from the real cause of the problem: supermarket power.

ACCC enforcement action against the duopoly for “unconscionable conduct” is nothing but a skirmish on the edge of supermarket power. It would be much better to spend time and money on creating alternative ways in which the eaters and producers of food can connect with each other outside of the major supermarket chains.

Chances are the ACCC will not win any unconscionable conduct case against the supermarkets. They have had very limited success in taking action for such conduct in the past. The relevant provisions poorly define unconscionable conduct and leave it to the courts to make a moral judgement in the circumstances of each case.

Here, the allegations are certainly serious. Suppliers claim that Coles and Woolworths require them to make payments above and beyond that negotiated in order to stock their products, and that the supermarkets impose penalties that do not form part of any negotiated terms of trade. Suppliers also claim that the duopoly does not pay the prices agreed and that they discriminate in favour of their own home-brand products.

These tactics may be unattractive, even uncivilised. But they are exactly what we should expect when two retailers hold 80 percent of the grocery market. Coles and Woolworths likely have a bevy of lawyers ready to show that their terms were set out in contracts that suppliers freely agreed to; any deviations were the rogue acts of individual bad apples. The supermarkets will argue that this is nothing more than robust competition in the interests of low prices for consumers.

It will be difficult for the ACCC to prove otherwise. In a competitive marketplace, why not ask for the lowest possible price from suppliers and demand extra payments for shelf space, in-store advertising and so on? Why not prefer home-brand products if they make more profit for the supermarket?

The real worry is the fact that these two supermarkets have gained so much power in the first place. We should not be wasting precious public resources fighting over particular instances of the abuse of that power. Instead, we should use every ounce of imagination and creativity we have to challenge the Coles and Woolworths duopoly over grocery retailing and therefore over the very relationship between consumers and their food.

The tragedy of the Coles-Woolworths duopoly is the narrow, greedy, profit-oriented way in which they control and manipulate the relationship between all of us who eat food and those who produce it. The supermarkets say that they are just delivering what consumers want – cheap, reliable, accessible food. Squeezing producers on prices is supposedly part of that equation.

Yet it is the supermarkets and processed food companies that present food to us as something that should be cheap, plentiful and industrial – devoid of any connection with the earth, sun, animals, plants and people who produce it. They barely give us a chance to find out about where our food comes from, let alone at what cost to humans and ecosystems it is produced and sold. If we knew, we would be shocked.

Take “free range” eggs as an example. Woolworths claim to be continually improving animal welfare standards throughout the supply chain. Coles claim to be helping customers switch to “free range” by cutting their prices on cage free eggs.

Yet both are demanding that producers supply “free range” eggs at a price that can only be delivered by an industrialised, concentrated egg production and retail system. This system does not and cannot match the glossy pictures of happy hens on the carton, yet consumers are told that this is what “free range” must mean.

Many consumers turn off “industrialised supermarket free range” as soon as they realise the conditions that the hens are actually kept in. They are even more likely to do so once they meet a farmer at a farmer’s market and taste a day-old egg from a truly happy hen for breakfast. The story can be repeated for any number of foods on the supermarket shelves.

Duopoly supermarket power is stopping us seeing and imagining alternative ways of producing and buying food. The supermarkets like to tell us that they are giving us affordable choices. Instead of spending money fighting over who they bully to deliver us those low cost choices, let’s spend time and money finding, celebrating and developing alternatives such as local, organic or wholefood stores, farmers' markets, exchange at community food hubs and backyard and urban gardens.

If we spent public money on creating alternative retail spaces and developing affordable ways to make tasty, fresh, sustainable food then there would be some true competition for Coles and Woolworths. Instead of asking the ACCC to occasionally thump the duopolists, let’s try to imagine how to nurture thriving small scale social enterprise to build healthier local relationships between us and our food. Then we can figure out what we need to do to make sure that Coles and Woolworths don’t undermine creative alternatives.

Christine Parker 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.

 

Fifteenth quarter of growth for Coles

Wesfarmers Limited, owner of Coles, has released its second quarter retail sales figures, with the supermarket chain experiencing steady growth in food and liquor sales.

Coles, Bunnings and Kmart, in particular, have delivered a "solid performance", Wesfarmers said in a statement released eariler this week, with the retail businesses boasting a record number of shoppers in-store over the Christmas period – Coles alone made almost $1b in sales in the week leading up to Christmas.

Managing director at Wesfarmers, Richard Goyder, said "Coles’ comparable food and liquor sales growth of 3.8 percent for the half was reflective of the ongoing improvement in the quality, service and value of the customer offer. The December quarter represented the fifteenth consecutive quarter of growth in comparable sales and sales density."

Headline food and liquor sales for the second quarter of 2013 were $7.7 billion, up five percent on the corresponding period in 2012, while headline sales in the first half also increased by five percent, to $14.3 billion.

"Food and liquor price deflation moderated to 0.9 percent for the second quarter reflecting lower fresh produce deflation," the report reads.

It also states that Coles' continued invest in lower prices has driven volume growth ahead of sales growth. This comes after an announcement earlier this month that the supermarket giant would be expanding its Down Down range with the addition of more than 100 products.

Coles managing director, Ian McLeod said the company's commitment to improving quality, service and value has attracted more customers in-store and continues to benefit suppliers through increased volumes.

However after announcing the expansion of its Down Down range, the Australian Food and Grocery Council (AFGC) slammed Coles for limiting its product range.

Criticism surrounded findings in a report released by Coles, conducted by Deloitte Access Economics, which found that Coles' product range had dropped 11 percent from 2010 to mid-2012.

AFGC's chief, Gary Dawson said "These figures confirm what shoppers report anecdotally – that they often can’t find their favourite products on the shelves any more when they go to the major supermarkets.

"The latest aggressive campaign by Coles to promote their private label products is a sign that this trend will continue."

Coles responded quickly with its own statement, claiming that the AFGC "has selectively used data from a Deloitte report to pursue a tired political campaign against the major supermarkets."

Coles opened 10 new supermarkets and closed four stores during the second quarter, taking the total number of stores to 753. The total number of liquor stores and hotels sits at 895 after the company opened 20 liquor stores, closed five and opened one hotel.

The liquor market is an area of growth for Coles, who together with its key competitor Woolworths are said to be interested in the purchase of the Ultimo Wine Centre in Sydney, which has an annual turnover of more than $4m.

 

Good times continue for supermarket duopoly

Coles and Woolworths are expected to report their strongest quarterly sales growth for more than a year later this week.

According to AFR, analysts believe December's hot, dry weather helped drive demand for fruit, salad vegetables and alcohol, with solid volume growth in supermarket and liquor retailers.

Food price deflation has also eased, which, when delivering the CHEP AFGC Retail Index, AFGC's Gary Dawson said is consistent with the food manufacturing industry's expected modest growth for 2013.

Wesfarmers, which owns Coles, is due to release its second quarter sales on Wednesday this week, with Woolworths following suit on Thursday.

Analysts are predicting Woolworths' same store sales in Australian supermarket and liquor stores to have risen by between 2.5 and 3.5 percent in the December quarter, AFR reports. This is compared to 1.1 percent in the second quarter of 2012 and 2.3 percent in the first quarter of 2013, and would be the supermarket giants' strongest growth rate in five quarters.

Sales at Coles are expected to jump by at least four percent compared with 3.7 percent in the first quarter of 2013 and could be its strongest growth rate in four quarter.

Earlier this month news broke that Australia has the fastest falling food prices in the developed world, after previously having the reverse title – fastest rising food prices – from 2000 to 2009.

Local food costs dropped 2.7 percent in the 12 months to the end of September – the biggest food price decline in the recent past, thanks to fruit prices normalising following the Queensland floods in 2010/2011, the Victorian floods of 2011 and Cyclone Yasi in 2011, as well as the end of the drought and the strong Australian dollar.

Coles also made headlines recently by announcing the expansion of its Down Down range, with more than 100 products added.

The AFGC hit out at Coles, however, arguing that the supermarket brand is reducing the range on offer to consumers and focusing on its own private label products.

 

Coles slams AFGC for telling half the story on price cuts

After the expansion of its Down Down campaign, the Australian Food and Grocery Council (AFGC) criticised Coles for limiting its product range, but the supermarket giant claims only half the story is being told.

Earlier this week Coles announced it was adding more than 100 private-label products to its Down Down range.

Soon after, the AFGC issued a statement slamming Coles for focusing on their own private-label products, and consequently limiting the range on offer to consumers.

The industry group cited research released by Coles and conducted by Deloitte Access Economics which claimed that Coles' product range dropped 11 percent from 62,000 products to 55,000 between mid-2010 and mid-2012.

Coles responded quickly with its own statement, claiming that the AFGC "has selectively used data from a Deloitte report to pursue a tired political campaign against the major supermarkets."

It adds, "Unfortunately, the AFGC have ignored the detailed Deloitte analysis about why and what has happened in Coles’ supermarkets and the Deloitte conclusion because it does not suit their story. The Deloitte report concludes: '…effective choice in the store is still high and consumers may be better off overall'".

Coles went on to add that branded products make up 75 percent of all products sold in its stores, and just as many private label products have been removed from shelves as branded products.

John Durkan, Coles merchandise director, said, "It is about time the AFGC became a more professional body that actually represents all of its members, many of whom have seen substantial sales gains from products sold at Coles that customers buy the most."

Click here to read more on this story.

 

Coles expands its ‘Down Down’ range

More than 100 products have been added to Coles' price-slashed 'Down Down' range, bringing the total number of products in this campaign to over 1,000. 

The latest price cuts, introduced this week, include eight percent on bread, 13 percent on juice, 27 percent on meat pies and 32 percent vegetable oil, says the Australian. Other discounted products include dairy spreads, cheeses, frozen foods, health and beauty products.

The mark-downs affect private label products only and were prompted by Coles' online research, which found that 65 percent of families are looking for increased savings on their household budget this year.

While the discounts are only guaranteed for six months, products added to the Down Down campaign in July 2012 will remain at the discounted price.

Earlier this week it was reported that Australia has the fastest falling food prices of the developed world, following a long stint as the country with the fastest rising prices from 2000 to 2009.

Price normalisation following natural disasters, the strong Australian dollar, increased competition between the supermarket giants and the growth of other players such as Aldi and Costco were all attributed to grocery price cuts.

Supermarket price cutting has been the bane of many food and beverage manufacturers' lives recently, with key figures including MP Bob Katter and celebrity chef Maggie Beer both slamming supermarket dominance and arguing their price wars threaten the livelihood of local producers.

The Australian Food and Grocery Council (AFGC) has released a statement slamming supermarkets for their strong focus on private label and home-brand products, resulting in a reduced product range for consumers.

Research released by Coles, conducted by Deloitte Access Economics and based on its own data, found that its product range has dropped 11 percent from 62,000 products to 55,000 from mid-2010 to mid-2012.*

"These figures confirm what shoppers report anecdotally – that they often can’t find their favourite products on the shelves any more when they go to the major supermarkets," said AFGC's chief, Gary Dawson.

"The latest aggressive campaign by Coles to promote their private label products is a sign that this trend will continue."

Dawson called Coles' pricing cuts "a classic Trojan horse tactic", disguising consumers' loss of choice and supermarkets' efforts to obtain an even greater market share.

Coles' merchandise director, John Durkan, said suppliers can benefit from its Down Down range.

“Helping Australian families make ends meet is our top priority but we know that customers want to know that lower prices for them does not mean suppliers get squeezed. Coles has invested tens of millions of dollars in these price cuts which should benefit Australian suppliers as orders increase,” he said.

The words war between Coles and the AFGC continues, click here to read more.

*The Deloitte Access Economics also found that:

  • The average discount among Down Down products is eight percent
  • Coles' prices storewide have dropped by an average of 3.2 percent in the year to the end of September

 

What’s in store for food manufacturing in 2013?

2012 has been a tough year for food and beverage manufacturers. Will next year be much the same?

Only coming in as editor of Food magazine a few weeks ago (although, it feels like a lifetime ago now!) I'm not going to pretend that I fully understand the trials and tribulations that 2012 has thrown at you manufacturers – big and small.

But, I am getting my head around a few of the big issues. Correct me if I'm wrong, but a lot of talk seems to be around that big scary phrase, 'Asian century'. Stories like this and this show that while there are a lot of opportunities for Australian manufacturers to take advantage of Asia's interest in our food industry, we're not exactly sure how best to take advantage of them and how much power or control we're willing to hand over. Consumers aren't 100 convinced either….

Another key issue is sustainability, and most of it seems to surround seafood at the moment. Whether it's naming and shaming those companies reluctant to embrace sustainable fishing methods or clarifying which species are threatened and which aren't, sustainability is sure to be another hot topic in 2013.

Let's not forget the supermarkets. The duopoly made headline countless times this year, with the dominance of private labels of particular interest to the industry, not to mention the price wars and their effect on our producers.

Love them or hate them, Coles and Woolies are here to stay, I just wonder if the consumer's concern for battling Aussie brands will continue to grow, and if/how the duopoly will respond?

Labelling, labelling, labelling. Manufacturers are under more and more pressure to be upfront and honest about EXACTLY what they are – are they organic? Better yet are they CERTIFIED organic? Are they Australian-made? And what does this even mean? Are the product's contents grown here? Is the product packaged here? Or is it made from 'local and imported ingredient?' – which can be hugely misleading for consumers. I think next year manufacturers' claims will be put under the microscope and labelling reforms will gain serious momentum.

Pressure is also on manufacturers to be upfront about how good their products are for consumers. Health is a growing concern for Australian consumers (as our waistlines are growing too) and industry bodies and governments are in the process of developing a labelling system which is easy to understand and which clearly defines the health and nutritional value of food and beverage products. It won't be traffic lights, but it could be stars.

Just last week proposals for new regulations were approved which would see stricter controls for on-pack health claims, including the need to provide scientific evidence to support claims as well as a requirement to meet specific eligibility criteria including nutrition criteria.

I know there are more, but these are the burning topics that I've read and written about the most in my brief few weeks in the editor's chair. But as I said in my introductory article, I'm all ears. Now's your chance to share your thoughts and tell all Food readers what you see in your crystal ball.

Merry Christmas to you all, and the Food team will be back (and ready for a big, eventful year) on 7 January, 2013.

 

Grain power: how Carman’s became a $50m empire

Ask Carman's founder Carolyn Creswell how she turned a tiny muesli producer that she bought for $2,000 into a $50m global brand and she'll say all it took was a bit of luck and a lot of guts.

"When I was at school my parents worked hard for my education but didn't give me any pocket money, so I had lots of part-time jobs, and one of those was making muesli one day a week. After about six months the owners said they were going to sell and whoever bought it might keep me, or might make the muesli themselves and I'd lose my job. So I thought 'well, I know the product, why can't I buy this little business?"

So as a complete business novice, that's exactly what 18 year old Creswell did, together with her workmate Manya van Aken – each paying just $1,000 for the business.

This was in 1992, and two years later Creswell bought out van Aken. Ever since she's been at the helm of Carman's Fine Foods, which manufactures muesli, nut bars, oats and biscuits.

"It was really hard. It took a long time to be able to earn money myself. For a while I had to keep having second jobs, as well as trying to do the muesli. It was hard. It was shocking. The first five years I was so broke, and I thought 'what am I doing? this is crazy," Creswell told Food magazine.

But this must be a distant memory now. Today Carman's Fine Foods is turning over an average of $50 million a year, and is exporting to 32 countries including the US and the UK, as well as being used by leading airlines and having a presence in Coles and Woolworths. Not to mention the fact that earlier this year Creswell was named Telstra Business Woman of the Year.

Private labels
While it's no secret that many Australian food and beverage manufacturers see supermarket private labels as a serious threat to their own livelihood, Creswell doesn't believe her business is threatened.

"I think anyone that put their head in the sand and didn't think that private labels were coming was just being unrealistic. I think we all knew they were coming – it was just about how you adjusted.

"For us, it's about owning that premium brand and offering a point of difference. There are a lot of people that think private labels are evil and terrible, but if I was in their shoes I'd be promoting them as well. There is absolutely still room for brands. People don't buy private label products to feel warm and fuzzy and to feel that they've got the depth and integrity that a brand they love gives them," she says.

Creswell insists private labels give manufacturers the chance to be more innovative about how they promote their products.

"Private labels are not in the most innovative space. They're much more mainstream and that gives this clear niche to other players," she says. "It's never going to be a situation where we walk in and the whole supermarket is private labels."

Building trust
So what makes Carman's products stand out on the shelf? According to Creswell it's all about building a story and creating trust. Making your customers aware that you're there for them is imperative, she adds.

"If something goes wrong, how do you deal with it? The greatest opportunity for us is when someone rings up and says "I only got five muesli bars in my box and not six". All of a sudden we're able to prove to them what kind of company we really are, and so from that customer interaction you can build a very loyal customer who loves you for life.

"It's not about having a 1800-number or treating everyone in a cookie-cutter way, it's about saying 'we hear you, we are talking to you and we are here for you.'"

Carman's, a Cheltenham-based business, also builds trust by marketing itself as a 100 percent Australian owned company.

"We've now got a new logo, which is a family owned Australian business logo [from Famliy Business Australia].

"Everything is manufactured here and we're 100 percent Australian owned. The only thing is that not every single ingredient is Australian. As much as we can we source Australian but it depends if it's something that we manufacture here in commercial quantities at a reasonable price," she says.

Add to the mix that the Carman's range is actually good for you and you've got a brand – already 20 years old – which is well positioned to stand the test of time.

"It's about saying that our products taste good and are good for you. We don't say that we're the most cutting edge health food company. We're saying that we'll try and keep numbers out as much as we can, we'll try and keep ingredients lists as simple as we possibly can. We say your food should come from the kitchen and not the chemist, so we're very conscious of using ingredients you might have in your pantry at home.

"I've been very careful about what Carman's will and won't do."

Text image: atablefortwo.com.au

 

Food for thought: key challenges for our industry

Australia is well into deficit when it comes to its food processing trade.

The Australian Food and Grocery Council's annual State of The Industry report (using ABS figures and KPMG's research) released in September showed we imported a net $2.8 billion worth of food and beverage, grocery and fresh produce.

More worryingly, total industry output dipped 4.5 percent for 2010-11 and its number of employees went down by 2.2 percent.

"The sector's growth, competitiveness and ability to create jobs are under threat," Gary Dawson, the AFGC CEO, said when the report was released.

"The findings of State of the Industry 2012 serve as a warning to policy makers at all levels of government that the Australian food and grocery manufacturing sector – Australia's largest manufacturing sector – is facing an environment where input costs are rising on everything from commodities to labour to energy, and retail price deflation continues to cut margins, placing the sector under increasing pressure".

Why are things in such an apparently bad way?

The high dollar – as has been the case with almost every segment of manufacturing – has presented problems. Terry Davis, the CEO of Coca-Cola Amatil – the parent company of SPC Ardmona, Australia's biggest fruit and vegetable processor – has said that supermarket private labels, the high dollar and taxes were driving many in the industry out of business.

"We all know high labour costs are an issue," he told a Rabobank agribusiness event, while pointing out the payroll taxes were a massive pain. "Tell me how a tax on employment fosters sustainability?"

Dan Tehan MP, a federal Liberal backbencher, is another outspoken critic of taxes on food manufacturers.

Tehan, the member for Wannon and a former adviser to federal Nationals leader Mark Vaile, believes that the carbon tax risks sending industries such as diary overseas.

"In recent government policy, obviously the carbon tax harms our international competitiveness and the government has hung the food manufacturing sector out to dry," Tehan told Food magazine. He compares it unfavourably to the EU's treatment of its food processors.

"The European Union not only gives its agricultural slash food processing sector subsidies, it also allocates them with free permits under their carbon tax."

Tehan also believes that the National Food Plan, which is in the green paper stage and ended its consultation period on September 30, will do nothing to address the problems food manufacturing faces.

"We've seen job losses in this area and yet government hasn't done anything to help what is key part of the whole food chain, where you value add, add additional income and employ people.

"At this stage it just seems to be a lot of motherhood statements. And one would hope that it would address the tough issues that need to be addressed if we are to ensure the long-term future of food manufacturing in Australia."

The food manufacturing industry's malaise isn't exactly news. The AFGC and consultants AT Kearney released 2020: Industry at a Crossroads report a year ago, predicting 130,000 jobs in the sector would disappear by 2020 if nothing was done, and that 55 per cent of manufacturers were pessimistic about the future.

The SPC Mooroopna plant's closure last year made big news. The beginning of the year saw Heinz stop tomato sauce production, closing its Girgarre factory, which also had people talking about the decline of local food processing. As did the announcement that Kerry Ingredients would close its Altona factory.

What's behind the industry's woes? Of course, exchange rates hurt. Others have pointed to the rise of private label brands in supermarkets.

In-house supermarket products have been around for three decades or more, but has only recently become so popular. IBIS World research published this year suggested a quarter of groceries were private labels.

Critics, such as the AFGC, say that private labels are getting in the way of Australian products getting to consumers, robbing Australian makers of shelf space, being increasingly produced offshore, and forcing them to whittle their margins away to compete on price.

"The Australian food processing sector is being destroyed," said David McKinna, a food industry consultant and principal of McKinna et al.

"Australia is going the same way as the UK and US where private labels are up to 70 per cent of the supermarket range."

For all the pessimism, are there many opportunities for Australian food and beverage manufacturers?

Certainly, with the Asian Century singled out as a big potential boost for future sales. Wine exporters are seeing excellent improvements in sales to China, the fastest growing market for Australian wine. The growing Asian middle class was singled out as a huge opportunity for Australian processed food in the recent Prime Minister's manufacturing task force report, describing it as "one of the few areas of manufacturing where high distance costs are outweighed by other factors, in this case Australia's natural resource advantage."

The task force report recommended initiatives like a Food Industry Innovation Hub to best identify what the market's marketing and taste needs might be.

"Food is singled out, it's something that's a comparative advantage in Australia," Professor Roy Green, a member of the task force, told Food magazine. "And food manufacturing is an important value adding element of food production."

Our biggest manufacturing segment has a huge potential to do well, despite the current difficulties around cheap imports, input costs and taxes, and the purchasing habits of supermarkets.

"If we can't do that, well, what can we do? That's a kind of basic product that we really have to be successful in," said Green.


 

Peach growers to lose thousands from SPC Ardmona cuts

Australian peach growers say they were only informed of SPC Ardmona’s decision to cut its peach quota by almost 20 per cent after they had begun preparing for season.

The growers say the short notice will leave them out of pocket, with some individual businesses set to lose tens of thousands of dollars.

SPC Ardmona, Australia’s last remaining major Australian-owned fruit processor, says it genuinely believed it had informed all growers in advance, and will work to ensure communication methods improve in future.

The company cut its peach quota by 17 per cent due to “significant fall” in consumer demand.

It said the cut was necessary due as sales have decreased by 14 per cent, despite increased activity and promotion.

SPC Ardmona also pointed to the high Australian dollar as part of the reason for the cut to the quota, as well as the cheap imports flooding the market as a result of the supermarket price wars.

Furthermore, the high Australian dollar has impacted on export opportunities for the products, while increasing competing pressures from cheaper imports.

SPC Ardmona is a subsidiary of Coca Cola Amatil which has announced expansion plans in its drinks business as previously reported in Australian Food News.

Earlier this year the company announced it would be embracing new packaging technology to reduce costs.

Maggie Beer slams supermarket dominance

Celebrity chef and food producer is the latest industry insider to accuse the major supermarkets of failing to support Australian food growers and manufacturers.

“So many Australians seek the cheapest alternative in food, and perhaps this is exacerbated by the big two [Coles and Woolworths], our duopoly, that pits one against the other in price wars, that see the farmer suffer. We have to do something about that,” she told the International Year of Co-operatives conference in Port Macquarie last week.

Beer’s pate, quince paste and ice creams sell through major supermarkets and independent retailers at a higher price than other comparable item, due to their high quality standard and use of Australian ingredients.

She said that while most Australians say they support Australian made and owned products, their purchasing behaviour proves otherwise.

''It's interesting Australians say they will support Australian-made and Australian-grown, but will we?”

“We support what's marketed most, and we so often support what's cheapest, especially with food.''

Beer was awarded an Order of Australia this year, after finding recognition for her cookbooks and television series focussed on cooking.

Beer has echoed the statements of Independent Queensland MP Bob Katter, who earlier this year told Parliament that the major supermarkets are killing our farmers.

''If we don't support our farmers, we will not continue to enjoy the freshness and the diversity of the produce we have now,'' she said.

''I have to say flavour, seasonality, ripeness, can not travel a long way.

Beer is in a good position to comment on the realities of farming, since she owns a farm in South Australia’s Barossa Valley with vineyards, olive groves, quince orchards and a soft fruit orchard.

“I know we live in a global market, but our local farmers can not compete against the imports of a global market when it comes to the cost of our labour.

''It's important that we pay a proper wage to a farm worker that not only sustains a family but sustains farming communities – whole communities.''

Terry Toohey Australian Dairy Farmers Director, told the Food Magazine Industry Leaders Summit earlier this year that the impact of Coles and Woolworths’ price wars will continue to drive farmers away.

"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,” he 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."

“It’s an unfortunate reality that milk price is a dollar.

“[It’s] simply unsustainable for all involved in the fresh food market.

“You can see the dairy farmers’ dairy families already suffering for Coles’ tactics.

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

“In NSW, my state, I see farmers being asked to sign contracts for 3 cents a litre than their previous contracts," he said.

“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 products 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.”

Beer also joined the myriad of critics of Australia’s current labelling laws, saying they make it very difficult for consumers to understand which products are locally-grown.

''We were bottling some of our olives,” she explained.

“The salt came from South Australia and we had some of our own red wine vinegar in the jar and we were labelling it and then we found out we could not say 'Produce of Australia' because the jar came from overseas.''

Australian entrepreneur Dick Smith, who launched his own food company over a decade ago, has also voiced his concerns about the ability for local companies to compete against cheap imports.

“The freedom we’ve usually had in Australia is that you could go to a supermarket and decide if you wanted to buy Australian, imported, high-quality, low-quality, it was up to you," he said earlier this year.

“ALDI has taken that decision away.

“The problem is that because so many of us go to ALDI because the prices are cheaper, Coles and Woolworths will copy.

“The reason ALDI’s so successful is you can’t compare a price.

“What Coles and Woolworths will do to compete with that, which they must do because they have Aussie mums and dads as shareholders and the board will get the sack if they don’t keep making profits each year, so they will go to more and more products where you can’t compare a price.

"I call that ‘extreme capitalism,’ and it’s a disadvantage to consumers."

Do you agree with Maggie Beer's comments? How can we fix this problem?

Image: Australian Traveller

Consumers should make own choice on caged eggs: industry body

A leading representative group for the egg industry has slammed announcements from leading supermarkets and other retailers that they will sell only cage-free eggs.

Australian Egg Corporation Limited has labelled the decision by Coles and Woolworths to refuse to sell eggs from one egg production system as “misguided.”

It believes the decision whether or not to purchase caged eggs should be based on a consumer’s personal choice and not a forced decision.

The AECL says consumers are being “manipulated” because cage eggs do actually “deliver welfare benefits to hens.”

Woolworths has announced its removal of caged eggs from its Woolworths Select brand line, and true to form, Coles also decided to follow suit this week announcing that by January it will have the same rules.

Coles had previously committed two years ago to banning caged eggs in its private label line by 2014, but will now bring that forward by a year.

The Animals Australia television campaign currently being shown nation-wide is misleading consumers by using emotive language and well-known personalities to promote their message, according to AECL.

James Kellaway, AECL Managing Director said the proof is in the figures, with current statistics showing 55 per cent of the Australian egg market is made up by caged eggs.

The remainder is made up by barn-laid and free-range eggs.