Govt outlines plans to improve food industry

 

A new government report has 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.

The middle classes around the world will increase to almost 5 billion by 2050, 85 per cent of which will be in Asia.

Prime Minister Julia Gillard announced in May that Australia should gear towards becoming the ‘Asian foodbowl,” but farmers and agricultural experts slammed the suggestions, saying current regulation is hindering the industry rather than helping it.

There have also been calls for a public register of all investment in Australian farming land and companies, which were only spurred on by revelations in May that a company owned by the Chinese Communist Party wants to buy the entire Ord Expansion Development in the north of Australia.

But the government maintains that investment, foreign or otherwise, is crucial for Australia’s economy.

''Any reduction in foreign investment in the agricultural sector would likely result in lower food production with potentially higher food prices, lower employment, lower incomes in the sector and lower government revenue,'' the paper says.

The paper also acknowledges the confliction between farming and coal seam gas mining, and the importance of finding a compromise between them.

''The government is confident that mining and farming can co-exist without affecting Australia's food production capacity but recognises land use planning is a significant policy issue that must be considered carefully.''

It also suggests that a forum between the supermarkets and manufacturers needs to be established, to improve strained relationships cause by the supermarket duopoly.

And while the Australian Food and Grocery Council (AFGC) believes its Responsible Marketing to Children Initiative (RMCI) has been successful at reducing the number of advertisements for junk food directed at children, the report suggests these voluntary standards will have to be monitored by the government.

“The food industry is definitely part of the solution, particularly when you look at overweight and obesity, Cristel Leemhuis, Director, Preventative Health Policy Healthier Australia Commitment at the AFGC told the recent Food Magazine Leaders Summit.

“It’s not voluntarily, the consumer is demanding it.

“Consumers push these businesses, so they’re responding to that consumer demands.

“I’m a fan of minimum effective regulation if we do need it lets go down that track, but let’s see what we can do without the regulation to start with.

“Can we actually address the issue without regulation?

“That’s the path we should take first.

“If that doesn’t work then we should step into these other areas, but we really need to try this other area first before we just straight down to [regulation].”

Private Label will damage our business: Four ‘N’ Twenty pie maker

The supermarket price wars have had many victims, and the latest to be impacted by the ruthless competition that is squeezing food companies out of business is iconic Aussie pie maker Four ‘N’ Twenty.

Yesterday the makers of Four ‘N’ Twenty pies, Patties Foods, which also manufactures Herbert Adams and Nanna’s brands, said the increase in private label will hurt its business, mostly likely beginning this year.

The pie maker predicts that in the second half of 2012, it will face much tougher trading conditions, as private label offering from Woolworths and Coles increase in numbers, pushing established brands off the shelves.

Both supermarkets have confirmed plans to rapidly increase private label products in the coming years, and as they do so, other manufacturers are seeing their products moved from prime positions on shelves, and disappearing altogether.

Very few manufacturers will speak on the record about the impact of the supermarket price wars, for fear their deletion from shelves will be speeded up if they do.

Even the Senate Inquiry investigating the power of the big two struggled to get people to speak, which is indicative of the power they wield over manufacturers and suppliers.

The few who will speak either speak out anonymously, or once they can no longer be punished, as was the case with the exiting chief executive of the Wine Federation Australia, Stephen Strachan, criticised the supermarkets’ power only when he had stepped down from the post.

''If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry,'' Strachan said.

''Whenever I've made comments in the press, I could only talk about retailers in a generic sense, but they [Coles and Woolworths] would religiously follow up on those comments and make it known they were displeased.”

The recent Food Magazine Leaders Summit also came up against the same issues.

We invited food manufacturers and other food companies to participate in the day, aimed to identify the main issues in the industry and work towards improvement, but when it became known that the impact of the supermarket dominance would be discussed on the day, dozens refused to come, for fear of the retributions of being associated with anything discussing such issues.

Despite the pressure from the supermarkets, Patties has managed to continue to grow, mainly due to other more traditional pie outlets.

The company expects the 2012 financial year will deliver a net profit of between $19.2 million and $19.7 million, up from $18.4 in 2011.

Second-half net profit will almost definitely remain the same as the same period last year, however, showing the beginning of a decline in profits.

When Patties Foods released its 2012 first-half results it expected that, despite the difficult conditions, it was still expecting improved profits for the second half.

"The second half saw increasing pressure on margins in the In Home (supermarket) channel, particularly with the continued growth of private label products,” Patties said in a statement to the Australian Stock Exchange (ASX).

Managing director Greg Bourke said the company has been working hard on driving strong sales growth, and has increased manufacturing efficiencies maintained tight control over costs to achieve its results.

UK govt spending £5 million on improving dairy industry

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

The funding is part of the UK Government’s Rural Economy Scheme, and the announcement came on the same day as dairy farmers across the UK gathered at a summit in London, calling on  processors to reverse a reduction in farmgate milk prices.

The Department for Environment & Rural Affairs (Defra) will hear bids for funding in the coming months, but have not revealed exactly what they will be looking for.

"We are looking for high-quality bids from the dairy industry to help unlock growth through game-changing investments," a Defra statement said.

"The dairy grant funding is to help producers to increase their competitiveness and added value.

“The details regarding what it is available for support, intervention rates etc are not yet available, but will need to meet current RDPE (Rural Development Programme for England) funding requirements.

The dairy farming industry has suffered similar problems as their Australian counterparts, as cuts to base prices impact farmers’ incomes and businesses.

Coles’ decision to slash milk prices to $1 per litre last year had huge flow-on effects for the industry, and farmers left the industry in droves.

Last month, the dairy industry announced that name-brand milk, which is slightly more expensive than the private label offerings, will now be permeate free.

The additive, which is much cheaper than whole milk, dilutes the milk and allows it to be sold cheaper, but as consumers become aware of the presence of permeate, they are looking for products without it.

The move by the dairy industry provides an obvious point-of-difference for consumers, which it hopes will result in more sales of the additive-free milk.

In May Dairy Australia received $1 million from the Federal Government to conduct research to assess energy efficiency on dairy farms nation-wide, but do you think the Australian dairy industry needs a similar scheme to the UK?

Image: The Guardian

Coles and Woollies wiping out regional grocers: lobby group

The Senate Inquiry into Coles and Woolworths’ anti-competitive behaviour is not impacting their mission to take over the grocery sector entirely, and the independents are desperately calling on the federal government to step in.

The independents are banding together to create a lobby campaign group over plans for the big two to increase floor space by over 5 per cent in the next few years.

Coles and Woolworths have undertaken research and development over the last few years which has seen them close dozens of stores and reopen them in other areas.

These areas, the independents say, are usually where they are located.

A local IGA or smaller grocer is then pushed out of business as they find it impossible to compete with the ridiculously low prices the major supermarkets can achieve through their anti-competitive and bullying behaviour.

The Senate Inquiry into the actions of Coles and Woolworths is struggling to get people who will comment on the behaviour of the big two, while factories continue to close and more private label products spring up on shelves.

Last week, Steven Strachan, the outgoing chief executive of the Australian Winemakers Federation, who would only speak once he had left the position, for fear of the consequences if he spoke out earlier, said the major supermarkets are bullying the winemakers too.

''If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry,'' Strachan said

''Whenever I've made comments in the press, I could only talk about retailers in a generic sense, but they [Coles and Woolworths] would religiously follow up on those comments and make it known they were displeased.

The pressure placed on food producers is well-known to everyone in the industry – Food Magazine has spoken to countless manufacturers about the pressures placed on them by Coles and Woolworths, but none will speak on the record – and they have even been accused of contributing to road deaths with unrealistic delivery demands.

A Commonwealth Bank assessment of Woolworths' $1-billion-a-year growth plan, which will see it swoop into more regional centres, including West Dubbo, Ulladulla and Morriset, found the huge supermarkets being developed are too big for the areas.

''Many of the Woolworths developments have been in areas with marginal medium-term economics for supermarkets,'' the Commonwealth Bank analysis said.

''We are concerned that in addition to the poor lending conditions, Woolworths is not helping itself by developing marginal sites.''

The report questioned Woolworths’ ''exceptionally high'' forecast floorspace growth of 3 per cent a year.

Master Grocers Australia, which lobbies on behalf of independents IGA and Foodworks, will use the bank assessment to support its claim that the big two are opening bigger stores than necessary to wipe out the competition.

''Master Grocers Australia believes the strategy is conscious, deliberate and intended to bring about a substantial lessening of competition in those local markets where over-large stores are developed,'' a draft report said, according to The Age.

Master Grocers will use the findings to lobby the federal government and Australian Consumer and Competition Commission (ACCC), calling for more action to stop the inundation of Coles and Woolworths’ around the country.

It wants MPs and the ACCC to use their powers to probably investigate and assess the profitability of such stores, push for mandatory competition and net community benefit tests in planning stages prior to approval and also legislate that prior notice of proposed property acquisitions by the major chains must be provided.

Coles spokesman Jon Church told The Sydney Morning Herald the claims are ''nice conspiracy theory with no basis in fact''.

''We only open stores where there is a consumer need and we believe we can make a return on our investment,'' he said.

And it’s not just the grocery market the big two are wiping out, they also plan to bring the liquor, hardware, office supplies and gaming, arms of their businesses to “marginal” areas.  

''The effect is the elimination of competition in these local markets,'' the report said.

Master Grocers has identified a number of stores which it says are “oversized,” including a 2383 metre square Woolworths store and liquor outlet in Bright, which has a population of 2100.

There is also a proposed 3100 metre square Woolworths store in Seville, where the population is 1800 and a 2600 square metre store which has opened in Koo Wee Rup, where there is only 2803 people living.

Woolworths spokeswoman Clare Buchanan told The Sydney Morning Herald that the company's competitors would not know the potential profitability of individual stores, but she did admit the company looks to open new stores in growth areas

''Developers look to incorporate amenities such as supermarkets in order to attract people to live in an area,” she said.

“This means we commit to a long-term investment in the future growth potential of a suburb.''

Here at Food Magazine, we've been asking whether we need a Royal Commission into the behaviour of the major supermarkets. Do you think it's come to that?

Reliance on transported foods could leave entire towns starving: govt report

A new report from the federal government has found that Australia’s growing reliance on foods transported long distances could be deadly in the case of natural disasters or other crises.

The Resilience in the Australian Food Supply Chain report, by the Department of Agriculture, found that the increasing dependence on perishables including milk and produce being transported thousands of kilometres would spell disaster, particularly for smaller towns, if a disaster occurred.

''The key question is whether, following a natural disaster or other major disruptive event, Australians in affected regions would go hungry,” the report says.

“The risk that this could happen is growing, especially if separate events in Australia's eastern states were to coincide.”

Over 75,000 truck trips are conducted each week across Australia to deliver more than 40 million cases of food, which is then sold from about 80,000 retail outlets including supermarkets, shops and restaurants.

Late last month the Transport Workers Union (TWU) accused Coles and Woolworths of contributing to road deaths by placing unrealistic demands on truck drivers, and the DAFF report also pointed to the increasingly complicated distribution networks created by the supermarkets as a contributing factor in the potentially dangerous situation.

''Longer supply chains expose transport routes to more points of potential vulnerability from such events as flood, fire and earthquake,'' the report states.

The Queensland floods in late 2010 and early 2011 highlighted some of the major issues with the current supply chain, with Rockhampton cut off by road, rail and air for more than two weeks and Brisbane coming within one day of running out of bread completely.

While nobody starved during the floods, it did highlight the potential risk of larger disasters, or more than one occurring at the same time.

If the Queensland floods had occurred at the same time as the bushfires of 2009, it would have been impossible for food to be delivered to far north Queensland, the report found.

As global warming increases, weather extremities increase and it becomes almost impossible to predict seasons, the possibility of two such disasters occurring simultaneously, or close enough to, is not unrealistic.

''If we had multiple emergency experiences happening around the same time – flood in Queensland, fire events in Victoria and another event in, say, South Australia – then the national system would struggle.,” Department of Agriculture Assistant Secretary Allen Grant told the current Senate inquiry into food processing.

Last week it was revealed the one in four products currently sold in Australia’s major supermarkets is private label and of those, one in two is imported.

The reliance on imports and lower quality foods to reduce costs in the cut-throat supermarket price war has led to countless Australian farmers, growers, processors and manufacturers being pushed out of work, but the current Senate Inquiry is struggling to get anyone to publically criticise the big two, for fear of punishment.

The departing chief executive of the Winemakers Federation of Australia, who would only speak out because he was leaving the representative body, came out swinging over the weekend, saying the supermarkets are also bullying winemakers, as well as food producers.

Coles and Woollies are bullying winemakers too: departing Winemakers’ Federation chief

Amid accusations that Coles and Woolworths are intimidating food manufacturers and produce growers so much they are too scared to even speak up at a Senate Inquiry, a leading Australian wine body has publically criticised the big two.

The anti-competitive and bullying behaviours of Coles and Woolworths are well known, and while countless food producers have discussed the damaging impacts of the supermarket duopoly on business with Food Magazine and other media outlets, almost all are too afraid to go on the record with their stories.

After it publically slammed the control the two supermarkets have on business more than once last year, Heinz declared on Friday that the relationships have improved significantly.

The comments come after a Heinz spokesperson told Food Magazine earlier this year that they were “trying to distance ourselves,” from the much-publicised criticism, which included  chief financial officer and executive vice president, Arthur Winkleback labelling the Australian supermarket environment “inhospitable.”

Now it’s the winemakers turn to publically oppose the behaviours of the major supermarkets, while everyone waits with bated breath to see if and how Coles and Woolworths will also punish them.

The supermarkets’ have both been accused of creating a culture of fear and intimidation among local wine producers, just as they have done in the food sector.

Stephen Strachan, who finished his role as the chief executive of the Winemakers’ Federation of Australia on Friday, would only speak to The Sun-Herald after his position had ended, which is inductive of the silo of silence in the industry.

''If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry,'' Strachan said.

''Whenever I've made comments in the press, I could only talk about retailers in a generic sense, but they [Coles and Woolworths] would religiously follow up on those comments and make it known they were displeased.

According to Strachan, the bullying is not only felt by local winemakers and Coles and Woolworths also flexes its power over foreign suppliers.

Furthermore, he said, they also collect sensitive commercial information from wine producers, and use that information to bully rival suppliers into selling for lower prices during negotiations.

Food Magazine has contacted both Woolworths and Coles for comment on the accusations, but neither has responded at this stage.

 

As supermarket power rises, Heinz praises progress

One of the few companies to be openly critical of the supermarket duopoly in Australia, HJ Heinz, has apparently mended fences with Coles and Woolworths.

Amid a climate of fear and bullying behaviour by the major supermarkets, where even a Senate Inquiry is struggling to get companies to speak up, HJ Heinz’ head of Asia-Pacific, Christopher J Warmoth has discussed the improved relationships.

''In the past eight months, we've seen a stabilisation of this business and that comes down to three elements," he said.

“First, we've improved our relationship with the retailers and they have told us that they have noticed our increased ability to bring them real value,'' he said.

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

Then in November its executive chairman, chief executive and president, William Johnston, told investors the company has had to overhaul its business strategy in Australia to deal with the supermarket dominance of Coles and Woolworths.

The comments came amid an announcement by Heinz that it would be closing three manufacturing facilities in Australia meaning more than 300 local jobs would go.

But the food giant has since tried to distance itself from those statements, which earlier this year a spokesperson told Food Magazine had been taken out of context.

The Australian food manufacturing sector is struggling to survive the supermarket price wars, which are driving profits up, pushing products off shelves in favour of supermarkets’ private label alternatives and, according to the Transport Workers Union, killing people on the roads.

One in every four grocery items now sold in Australian supermarkets is private label and of those, about one in two is imported.

Staying on the good sides of Coles and Woolworths is a good business plan in itself, as failure to do so can spell the end of a business.

Countless producers and manufactures have shared their struggles with Food Magazine, but refuse to go on the record with their stories for fear that being critical of the major supermarkets would be suicide.

Australia is one of Heinz’s biggest markets, bringing in an estimated $1 billion last year.

In contrast to the comments made and financial hardship experienced by Heinz last year, Warmoth now says the company is doing well.

''Australia has also reduced cost on every front,” he said.

“We have five factories, we closed one and have downsized three.

“We had a record year by far on the supply chain productivity.

''Now we are not where we want to be in Australia, but we've made significant progress and we enter [next financial year] with a much stronger foundation.''

What do you make of the latest comments from Heinz? Do you think they’re sincere?

Where does the food sold in Australian supermarkets really come from?

One in every four grocery items now sold in Australian supermarkets is private label and of those, about one in two is imported.

The Age has conducted an investigation into the state of the supermarket sector, and the results would not surprise anyone in the Australian food manufacturing sector.

It found the rate of imported food products is increasing at a rapid pace, as the only way for the companies to provide their ridiculously low prices is to buy food produced in countries by cheap labour.

South Africa and Thailand, two countries notorious for lacking in workers’ rights and having extremely low wages, are two of the markets commonly used by the cheap food retailers in Australia.

Researchers from the Australian National University embarked on a mission to follow the supply chain of many private-label products sold in Australia, which found them in South African fruit processing factories and canned pineapple facilities in Thailand.

"One of the canneries made private-label products for over 100 supermarkets," researcher Libby Hattersley, who inspected the South African businesses, told The Age.

"They just slap the retailers' label on it and send it out to them."

Differing food safety laws a risk for consumers

While the ethical issues involved with sourcing food from such countries are becoming increasingly important to consumers, there are various other issues involved with these systems.

“[No Australian food manufacturers] can survive in this environment, most places I’m going, they’re even competing with their own plants in other countries, if the Malaysian or Chinese plant is going better, they have to compete,” Jennifer Dowell, National Secretary of the Food and Confectionary division of the Australian Manufacturers Workers Union (AMWU) told Food Magazine earlier this year.

“The problem with that is that people aren’t comparing like with like.

“We produce food to a very high level and what is being imported from overseas needs to be the same quality.

“There needs to be more regulation and better testing for what comes into our country.

“If food is imported from a high risk site, like China, that will undergo testing, but not if it’s from New Zealand.

“The way the import laws work in New Zealand mean that they can import a product from China, put it in a bag in New Zealand and ship it to Australia as a ‘product of New Zealand.’

“If we try to export to other countries we face huge barriers, but we have removed all the barriers for others getting food into our country.”

The issues with the Senate Inquiry

Dowell was heavily involved in the Senate Inquiry into the supermarket duopoly in Australia, which was set up to investigate the anti-competitive practices and bullying behaviour of the major supermarkets, which are pushing Australian companies out of business.

But ironically, or tragically, the proof was in the imported pudding, as the Inquiry struggled to convince manufacturers to speak up, as they were terrified of the repercussions, including being relegated to a lower shelf, incurring more fees or removed from the shelf altogether.

Australian food producer Dick Smith said the blame lands at the feet of supermarkets ALDI and Costco, who rely entirely on imported goods, when he fronted the Inquiry earlier this month.

He believes the other supermarkets embarked on a game of catch-up, which has led to the current situation.

Australian made: are people really willing to pay more?

In April, Smith joined a number of local food and beverage producers, including Glen Cooper, chairman of Australia’s largest beer brewer, in  calling for a dedicated “Australian made” aisle in supermarkets to make it easier for consumers to choose locally made products and keep local businesses afloat.

Cooper believes laws which force supermarkets to set aside a minimum quota of floor space for locally-made food would be one way to slow the flood of cheap imports and prevent some manufacturers from tricking consumers into buying products they think are made in Australia, but are in fact made primarily from imported products.

"It's not realistic for busy shoppers to read every label to see its country of origin before you put it in your trolley," Cooper told Channel 7's Out Of The Blue program.

"So I think they [supermarkets] should be forced to have a certain amount of locally grown content and that it should appear in a clearly defined area designated for Australian-made products only.

While most Australians say they would prefer to buy Australian made, even if it comes at a higher price – indeed, at last check, a poll on The Age’s website showed 80 per cent said they would pay more for locally produced foods – the realities of the current economic climate are seeing more shoppers buying primarily on cost.

Coles and Woolworths maintain that they endeavour to source the majority of their food products from Australia, but one in two products in the Woolworths Select brand is imported.

It’s premium brand, Macro, has 85 per cent Australian products.

Coles will not release a figure on the percentage of its private label products that are sources locally, but The Age reports a source with connections to the business said it imports about one third of its own brand products.

The supermarkets like to toot their own horn when they do make a local supply deal, and blame it on a lack of Australian interest when they source from foreign markets.

"You'd be surprised how many times we get no one responding in Australia to our invitations to supply," Woolworths head of own brand Gordon Duncan told The Age.

It is notoriously difficult to get any Australian food manufacturers to speak on the record about the struggles, as they fear punishment from Coles and Woolworths, but Food Magazine is aware of numerous companies who are unable to supply to them due to their unrealistic demands.

Indeed, earlier this month Transport Worker Union (TWU) accused the major supermarkets of contributing to road deaths as they place unrealistic expectations on suppliers and drivers.

Coles recent deal with Simplot, the only remaining Australian-based frozen food processor,  to supply its house-brand vegetables, will apparently be so good for the industry they won’t even be able to grow the amount needed to supply both major supermarkets, according to Duncan.

The peak representative body, AusVeg, has labelled this “nonsense.”

Considering that in the last two years, fruit and vegetable exports have declined $200 million to $497 million, Coles’ comments are very optimistic.

Earlier this month the second Queensland tomato processor to go into administration this year left 40 employees out of work.

Bundaberg tomato farm, Basacar Produce went into voluntary administration, following in the footsteps of the nearby SP Exports, which collapsed in February, blaming the high Australian dollar and the supermarket price wars.

The SP Exports farm was the biggest in Australia before it collapsed, leaving hundreds of people unemployed.

While the Simplot-Coles deal is being touted as positive for the produce industry, it could mark the beginning of issues for the frozen vegetable industry that have plagued fresh produce suppliers for some time.

With the dairy industry still reeling, Coles slashed the price of produce in half in February and AusVeg spokesperson Simon Coburn told Food Magazine it “had the making” of the milk price wars.

“Long term this could deliver lots of damage to the industry,” he told Food Magazine.

“Depending where the reduced retail price is going to be absorbed, whether it’s a small grower or a big business, this will damage them long term.

“Eventually it will come back to growers and that’s where they’ll get into trouble.

“These prices aren’t sustainable if they’re passed onto growers, small operations and even big ones won’t survive this.

How do you feel about buying imported versus local products? Do you think we need a Royal Commission into the state of the supermarket duopoly? 

Federal Government provides $1m funding to improve dairy technology

Dairy Australia has received $1 million from the Federal Government to conduct research to assess energy efficiency on dairy farms nation-wide.

As the national services body for dairy farmers and the industry, Dairy Australia helps farmers adapt to a changing operating environment, and work towards a profitable, sustainable dairy industry.

The funding will provide over 900 farmers with information and support to improve farm energy efficiency, hopefully cutting costs for individual farmers and larger organisations, who are struggling to compete in the current retail environment.

Earlier this month, dairy farming was rated the second worst job in the world, based on physical demands, work environment, income, stress and hiring outlook. 

In April, Western Australian farmers met with Wesfarmers boss Richard Goyder to discuss the impact of the milk price wars on production and try to find a solution.

The farmers want fairer pricing strategies from the group, which includes Coles, and last week the WA Farmers Federation passed a motion to boycott Wesfarmers and its subsidiaries.

The WA Farmers Dairy Council say the “predatory pricing” by the major supermarkets have devalued the industry.

The Australian Dairy Industry Council’s project is also supported by the Australian Dairy Industry Council, milk processors and state agencies.

Manager of Dairy Australia’s Natural Resource Management Program, Catherine Phelps, said the cost of using energy is a major concern for farmers and other workers in the dairy industry.

 “The conditions are right for a very effective national project,” she said.

“The secured funding would help deliver energy assessments to all eight dairy regions across Australia, tailoring it to meet local needs.”

Some of the recommended options will most likely include changes to management practices, optimisation of current equipment and capital investment, Phelps explained.

Are Coles and Woollies bullying the major TV networks too?

While everyone in the Australian food manufacturing industry is aware of the bullying behaviour of the major supermarkets, it seems they are also now impacting Australian TV networks, which are declining to screen ads criticising Coles and Woolworths’ stake in pokie machines, but refusing to say why.

The advertisement, which point out that Coles and Woolworths own “more dangerous pokie machines than the five largest Las Vegas casinos,” shows a woman unwittingly spending excess money at the supermarket checkout, which has been changed to look like one of the gaming machines.

It also targets the “Fresh Food People,” slogan, changing it to “The Pokies People,” and also uses the Woolworths Everyday Rewards logo, which it launches today.

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The advertisement, created by GetUp! is not being screened by the major TV networks in Australia, but none of the stations have explained why.

A spokesperson from the advocacy organisation told Mumbrella they have not been given a reason why they won’t show the ad.

Food Magazine has contacted Channels 7, 9 and 10 this morning, but nobody was able to provide any answers.

As the Senate Inquiry into the impact of Coles and Woolworths’ anti-competitive behaviour is having on the food industry struggles to get witnesses to comment, for fear of being punished, it seems the major supermarkets are throwing their weight around in an increasing number of sectors.

Calls to Coles and Woolworths have not been returned.

The far-reaching impact of Coles and Woolworths has long been documented, and many are highly critical of the stake they have in various sectors.

The Senate Inquiry is slowly gaining some information about the issue, but most food companies are still too afraid to comment on the actions of the supermarkets.

Do we need a Royal Commission into the power of the major supermarkets in Australia?

Coles and Woollies not entirely to blame for supermarket wars, Dick Smith tells Inquiry

Dick Smith has warned against forcing the break-up of Coles and Woolworths, saying it would only further damage the food sector.

Speaking at the Senate Inquiry into the Australian food processing sector this morning, the entrepreneur also said government protection of the food industry, by enforcing a quota of Australian products, would be a positive move.

Industry protection funds, similar to those in the car industry, could be another viable option, he said.

In his submission to the Inquiry, Smith blamed the current supermarket climate, which is pushing Australian companies and farmers out of work, on rich foreign companies, namely ALDI.

He said dividing up Coles and Woolworths will not improve the situation “because I think they will just become uncompetitive when they become small with the internationals we allow them to compete with.”

Smith voiced his concern that the current “extreme capitalism” environment will lead to WalMart and Costco being the only supermarket companies in the world.

He told the Inquiry he does not believe the infamous milk price wars, which saw Coles drop the price of private-label milk to $1 a litre and Woolworths quickly follow suit, was either of their faults, but rather the blame is squarely at the feet of foreign-owned cheap food retailers.

''I think Coles and Woolworths were reacting to the situation that Aldi and Costco have come here,'' Smith said.

He also wants penalty rates in Australia looked at, and says a reduction in the rates would improve our competitiveness.

''Do we value our country towns?” he asked

“Which I do, do we want to go to these country towns and find them boarded up?

“Because our farmers are paying $20 an hour for labour, (and) will never be able to compete with people paying $5 an hour.

''But don't blame Coles and Woolworths for it, I think we are getting off the track…I think it is the fact consumers want the cheapest prices.''

Smith maintains Australians would readily pay slightly higher food prices if it ensured the future of the food industry.

Unfortunately, recent studies have shown that while most Australians say they would like to buy Australian produced and processed food, the main contributing factor is low price.

Similar rules to those in television broadcasting which impose a certain quota of locally-made content, would be effective in the supermarket sector, he said.

''One idea that I heard a number of days ago which could have potential is that we require Australian supermarkets to have a certain percentage of their sales, say 25 per cent, to be from Australian-owned processors and made and grown in Australia,'' Smith said.

''The advantage in doing that is it will create a level playing field.''

Last month Smith, along with Greg Cooper, chairman of Australia’s largest beer brewer started calling for a dedicated “Australian made” aisle in supermarkets to allow shoppers to easily understand which products are locally made and produced, and therefore keep local industries alive.

The current packaging and import regulations leave most consumers confused, they said.

Smith predicts that ALDI’S share in the supermarket sector, currently sitting at 8 per cent, will increase gradually over coming years.

 

300 more jobs slashed in dairy sector: Murray Goulburn’s profit declines

Australia’s biggest dairy foods processor will slash 300 jobs to lower costs in the increasingly difficult dairy industry.

Murray Goulburn, a co-operative owned and controlled by dairy farmers turns a third of Australia’s milk supply into diary products which are then sold domestically and to export markets.

It recently achieved praise and appreciation as a price leader in the local market, after increasing the price it paid for milk products at the farm gate.

But the pressure on the dairy sector from supermarkets and importers has led to a decrease in Murray Goulburn’s profits.

Murray Goulburn, the maker of Devondale butter and Cobram cheese will cut the 300 jobs to lower costs in the increasingly difficult dairy industry.

It conducted a detailed review of its head office and processing operations before deciding to eliminate 12 per cent of its workforce.

 

The 300 jobs will come from various parts of the business, with 168 positions from processing sites and distribution centres lost, 59 from the head office and the remainder through natural attrition.

Those in processing and distribution roles will be made redundant by the end of June and the head office roles will become redundant by September.

Managing director Gary Helou blamed the decline in world market prices as a result of higher global milk supply as the main reason for the job losses.

He said the company needs to improve its manufacturing efficiency, slash head office costs, increase its global competitiveness and deliver higher farm-gate prices, and these changes will begin some of these improvements.

"These are difficult but necessary decisions to ensure that Murray Goulburn can remain competitive,'' he said.

“It is in the interests of our suppliers, shareholders, employees, communities and customers that MG remains a strong business into the future.''

The company has promised employees full entitlements.

Image: The Herald Sun

Dick Smith fronts Senate Inquiry into food industry

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.

Supermarket price wars are killing drivers: transport union

The supermarket price wars are claiming more victims than just food manufacturing facilities, with accusations from the Transport Workers Union (TWU) that the pressure is forcing truck drivers to drive unsafely, leading to road deaths.

TWU federal president Tony Sheldon told ABC News that the tight deadlines forced on drivers are unrealistic and forcing them to drive unsafely.

"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," he said.

"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."

In a bid to shine some light on the dangerous impacts of the major supermarkets on drivers, the union will begin a series of supermarket protests in Sydney, Melbourne, Brisbane and Perth today.

He said the larger transport industry is being impacted by the behaviour of the major supermarkets.

"When the two big gorillas make a decision, and particularly with the aggression of Coles, it means a knock-on effect occurs right across the market, right across industries above and beyond retail," he said.

Is Coles the ringleader?

It’s not the first time Coles has been identified as the main instigator of the anti-competitive and bullying behaviours currently plaguing the food industry, with many in the sector believing Woolworths simply has no choice but to match Coles’ prices and attitudes.

Last year, Coles was the first to drop the price of milk to $1 per litre in the now-infamous milk price wars, and earlier this year it slashed the price of produce in half.

The impact has significant flow-on effects for food manufacturers, growers and suppliers, who cannot maintain a business with prices so low.

Earlier this year national secretary for the food and confectionary division of the Australia Manufacturing Workers Union, Jennifer Dowell discussed the damage the supermarket price wars are doing to the Australian industry.

“The mistake that most people make in these Inquiries and things is that they look at Coles and Woollies as retailers, but they are food processors and they control the market,” she told Food Magazine.

“If a company like Nestle came out and said “we’re going to buy a stake in Coles, and dominate the shelves with our products,” there would be uproar, it would be a huge scandal, but when the supermarkets do it, it’s a non-issue.

“That just doesn’t make sense.”

Sheldon agrees, saying the systems in place to force drivers to arrive on time are unsafe and unfair.

"When you dominate the market to the degree they do, and have policies that actually say if you arrive outside a half-hour window you get fined; as an owner-driver or a transport company, if you come in within that half hour and we can't unload you, you could still waiting for a day for hours," he told the ABC.

"We've got plenty of examples of people having to stay a whole day or being called back the next day without any work, without appropriate breaks, and with fatigue and economic pressure that goes on the transport companies.

"[The policies] are a damnation of this industry and the retail industry – how it squeezes the road transport industry and leads to unsafe practices."

Speaking up is commercial suicide

The pressure Coles and Woolworths place on companies and workers are well-known in the industry, but almost all are too afraid to speak publically, for fear they will be pushed out of business for doing so.

A Senate Inquiry into the behaviours of the major supermarkets found people would only speak up on the basis of anonymity and most were still concerned that even under such conditions, they would be found out by the big two and punished.

But Australian Logistics Council chief executive Michael Kilgariff told the ABC the latest claims from the TWU need to be substantiated and he believes there is enough regulation in the industry.

"The Australian Logistics Council has a retail logistics supply chain code of practice which deals with these issues such as waiting times, and both the carriers and the supermarkets are very focused on making sure that we don't have these sorts of situations occurring,” he said.

"If Tony Sheldon and the TWU have any evidence that the law is actually being broken, then they have a legal responsibility to ensure that the authorities are aware of where this is occurring so that prosecutions can commence.

"The supermarkets are currently liable under chain of responsibility laws – as is everybody in the supply chain – for incidents that may occur anywhere else in the supply chain where it can be demonstrated that they somehow caused it to happen.

"[The] chain of responsibility… is about to become a national law from January 1, 2013, and so we're going to have a national focus on these issues, and again if the TWU knows that the law is being broken, then they have an obligation to ensure that the authorities are informed."

Coles denies claims

Coles and Woolworths both refused to speak to the ABC on the issue, but said in a statement that the claims are baseless and incorrect.

"We're disappointed the TWU continues to make unsubstantiated claims about our transport practices.

"We outsource our transport business to large and reputable providers, we take safe transport practices very seriously and in no way do our transport contracts force drivers into unsafe or illegal practices. 

"We require our transport providers to comply with all road safety laws and regulations and all our freight contracts include fatigue management programs.

"Contrary to the TWU's claims, Coles's delivery windows into our stores are two hours, which is aligned with retail industry practice, and there are no penalties for suppliers or carriers for missing a time slot into our [distribution centres] or stores. 

"Coles is a co-founder of and current signatory to the Australian Logistics Council's retail code of practice and takes chain of responsibility very seriously as being core to its operating practices".

The release of yesterday's Federal Budget didn't offer any immediate improvements for the industry either, with calls from the Australian Food and Grocery Council (AFGC) for a Supermarket Ombudsman ignored.

It  wanted the appointment of an Ombudsman, to oversee the anti-competitive and bullying behaviour of the major supermarkets to ensure a future for Australia’s food sector, to be included in the budget.

 

 

 

Coles to source all frozen veg products from Australia

Supermarket giant Coles has announced that from this month all its private label frozen vegetable products will be grown and packed in Australia.

The vegetable products will be sourced from Aussie farmers and packed by Australian based food processor, Simplot.

Last month Callum Elder, executive general manager of Simplot, discussed the difficulties for food companies trying to stay afloat in Australia.

''Penalty rates are a significant cost difference to manufacturers, particularly in the agricultural game where you're unable to properly plan,'' he told the Sydney Morning Herald.

''Our productivity hasn't increased in the past three to four years, as an industry, but yet we've been paying 3 to 4 per cent increases [in wages], which is a large part of the cost.

“It's very expensive to put people into Australian factories.''

Coles merchandise director John Durkan said the latest decision by Coles will make it the only Australia’s supermarket private label to offer 100 per cent Australian-grown frozen vegetables.

Coles’ total sales of frozen vegetables is almost $200 million each year, and the  private label range accounts for about 20 per cent of  that; more than $40 million annually.

“At a time when most other frozen vegetable brands are being sourced from overseas, we’re very pleased that, through our partnership with Simplot, we’ve been able to continue supporting Australian vegetable growers,” Durkan said.

More than 90 per cent of Coles’ private label frozen vegetable products is sourced from Tasmanian vegetable growers.

This represents over $37 million in sales for the supermarket, which growers will no doubt be hoping will be filtered down to their operations.

Simplot Australia’s Executive General Manager of Retail, Graham Dugdale has welcomed the supermarket’s decision.

“While other frozen vegetable suppliers have moved their sourcing and manufacturing off shore, Simplot Australia has continued to invest in relationships with the Australian farming community and factory capability, and is now the last remaining frozen vegetable manufacturer in Australia.

“Our strategic relationship with Coles gives consumers the choice to purchase Australian grown frozen vegetables from both ‘Birds Eye’ and Coles brand.”

 

Federal Budget 2012: Did the government forget the food sector?

The Gillard government has left the food processing industry reeling with its Federal Budget, channelling little money to the sector and ignoring calls for a Supermarket Ombudsman.

Farming groups have slammed Prime Minister Julia Gillard’s declaration that Australia can be a ‘foodbowl’ for Asia, saying current policies are killing their businesses, not helping them.

Despite the fact that hundreds of workers in the food processing sector have lost their jobs in the last two years as SPC Ardmona, McCain, Heinz and National Foods, amongst others, close their doors or scale back their businesses, Gillard announced earlier this week that the future for Australian food should be in export.

The high Australian dollar, supermarket price wars and lack of new recruits in the sector are making it impossible for food manufacturers to make a profit, or in many cases even break even.

Dairy, produce industries in trouble

The infamous milk price wars is leading dairy farmers to leave the industry in droves, and with the average age of an Aussie farmer about 65 and no new workers coming through the ranks, the future of the farming sector looks dire.

With the dairy industry still reeling, Coles slashed the price of produce in half in Fenruary and AusVeg spokesperson Simon Coburn told Food Magazine it “had the making” of the milk price wars.

“Long term this could deliver lots of damage to the industry,” he told Food Magazine.

“Depending where the reduced retail price is going to be absorbed, whether it’s a small grower or a big business, this will damage them long term.

“Eventually it will come back to growers and that’s where they’ll get into trouble.

“These prices aren’t sustainable if they’re passed onto growers, small operations and even big ones won’t survive this.

When asked whether the price cuts shows a lack of knowledge or respect for growers from Coles, Coburn said that will be determined by Coles’ behavior going forward.

“It depends on how these costs will be set up,” he said.

“If they absorb the costs within their own structures, it could be good, but if it is going to be passed onto growers, which it probably will, it shows mass disrespect to growers.

Murray-Darling Basin impacts

Australian Dairy Farmers Association Chris Griffin voiced similar concerns about the impact of the supermarket when he spoke to Food Magazine in the same month, saying the dairy industry is not only losing workers, but will be further damaged by the carbon tax and Murray-Darling Basin plan.

“The carbon tax will also cause problems when it’s implemented on the 1st of July; we’ve done work to find the costs that will be incurred and they are largely electrical costs,” he said.

“The average increase for dairy operation will be between $5000- $7000, and that will be an overall direct increase in cost that will have to be passed on somewhere.”

The cost increase cause by the carbon tax will have to be absorbed by the farmers in the milk export market, Griffin told Food Magazine.

“It will have to be absorbed by the farmer because our price is governed by a royal export set price.

“Australia has come out ahead of the game in a way with implementing the carbon tax, but farmers can’t go to their overseas customers and saying ‘we need extra money because Julia has put on a carbon tax,’ the customers would just go elsewhere.”

The Murray Darling Basin plan, which is tipped to see farmers sell 2750 gigalitres of water back to the Government, will mean less water available for the same number of farmers in the region, Griffin explained.

“Given that the government has a national food plan they’re trying to roll out and we believe the dairy industry is a massive part of that, we would like to consult with them about the plan,” he said.

“Australia has been very fortunate that we have been able to produce enough dairy products not only for domestic consumption, but also for export, which then generates wealth for the country.

“This plan is going to jeopardise that.”

“At this stage we say a certain amount of water has been taken out already and we need to have a strategic look, working with the government to see where it is going to come from in the future rather than using the ‘Swiss cheese approach’ currently being used.

“It means less water for the same amount of farmers, and maintenance costs will be higher because there are not as many people contributing to the maintenance.”

National Irrigators' Council chief executive Tom Chesson said if the Gillard government wants to feed the Asian middle class, it will need to ensure "water to produce food,” and  “unless government gets its act together, we won't have a food processing industry left.”

Declining produce output

AusVeg chief executive Richard Mulcahy voiced similar concerns about the government’s view of exporting to Asia, saying there simply isn’t enough.

"Only 7.7 per cent of our ]vegetable] production goes offshore,” he said.

“We need to address that before coming up with ambitious plans about feeding hundreds of millions of people in Asia.”

In the last two years fruit and vegetable exports have declined $200 million to $497 million.

The Federal Budget, announced this morning, revealed funding for the Murray-Darling Basin will be reduced, and the Commonwealth Environmental Water Office, which manages the government’s water rights, will be slashed by $13.2 million over the next seven years.

The Caring for our Country program, which aims to improve biodiversity and sustainable farming, which many feared would be cut in Wayne Swan’s budget, was retained.

A further $2.2 billion will be invested into the program’s second phase, to run until 2018.

Part of the money will concentrate on ensuring the health and sustainability of the Great Barrier Reef, which will get an extra $12.5 million over four years to fund research on the impact of climate change and how to deal with global warming.

Over six years, $58 million will be delivered to develop and maintain marine reserves to protect oceans surrounding Auustralia.

But submissions to the senate inquiry into food processing are painting a bleak picture for the rest of the industry, saying the sector is "going backwards at a rate of knots".

The Australian Food and Grocery Council has also been lefty disappointed by the Budget, after calls for funding for a Supermarket Ombudsman were not delivered on by the government.

The AFGC wants an Ombudsman to oversee the anti-competitive and bullying behaviour of the major supermarkets to ensure a future for Australia’s food sector.

WA farmers meet with Wesfarmers to discuss milk price

Western Australian farmers have met with Wesfarmers boss Richard Goyder to discuss the impact of the milk price wars on production and try to find a solution.

The farmers want fairer pricing strategies from the group, which includes Coles, and last week the WA Farmers Federation passed a motion to boycott Wesfarmers and its subsidiaries.

The WA Farmers Dairy Council say the “predatory pricing” by the major supermarkets have devalued the industry.

"Unsustainable" pricing

Australian farmers have been fighting the major supermarkets over the price wars since Coles slashed the price of its private label milk to $1 a litre in January last year.

Woolworths quickly followed suit, and despite a Senate Inquiry and an investigation by the Australian Competition and Consumer Commission, the supermarkets were allowed to keep trading at the reduced price, which the industry has slammed as “unsustainable.”

But president of the Australian Dairy Farmers Association, Chris Griffin, told Food Magazine earlier this year that the financial pressures placed on farmers through the price wars has led to many leaving the industry.

“We know there’s been at least 30 leave the industry in Queensland alone, and the majority are sighting the uncertainty of milk prices as the reason,” he said.

Unsurprisingly, dairy farming was rated the second worst job in the world last week, based on physical demands, work environment, income, stress and hiring outlook. 

Many WA farmers wanted to support the proposed boycott immediately, but the motion was passed on to the executives of the association for assessment.

Managing director of Wesfarmers, Goyder, met with WA Farmers president Dale Park and senior vice president Tony York this week to discuss some of the issues, including the impact of the pricing on the industry, which it says has lost it $25 million.

Who absorbs the price cut?

Coles has continually denied that its low-priced milk is impacting the dairy industry, claiming it is absorbing the costs, but those in the industry know that while that may be the case for now, in the long run producers will be taking the financial hit more than they already are.

“What it comes down to, according to the supermarkets, is that it comes down the them looking after us as consumers by cutting prices, but it comes at the expense of quality and also, they’re not asking consumers if they’re OK with this, they’re just deciding for us,” Australian Manufacturing Workers’ Union (AMWU) food and confectionary secretary, Jennifer Dowell, told Food Magazine earlier this year.

“Invariably they say it is not absorbed by the grower or the manufacturer when they cut the prices but in the end it always does.”

Following the intense debate about the cost cutting by Coles and Woolworths and the ruling that $1 per litre was acceptable Food Magazine asked Griffin if the chances of the big two supermarkets increasing the price of milk to help with the increase in farmers’ costs, including the carbon tax, would most likely be slim.

“That’s a question for Coles,” he said.

“We believe the tactic all along by Coles was just to get people through its doors, and since dairy products are in 97 per cent of consumers homes, it’s a draw card they’ve used.

“It’s always at the back end of the supermarket, so you have to walk through all the other products and displays to get to it, so it is simply a marketing ploy they’ve implemented at the expense of the dairy industry.”

When contacted by Food Magazine to find out if they would consider absorbing the cost increase, Jim Cooper from Coles said "we are not speculating about the potential impact the carbon tax will have on retail pricing."

Fear campaign

While the meetings between farmers and the major supermarkets are a step in the right direction, hopefully it will pave the way for other suppliers to follow suit and start talking about the impact of the price wars, because up until now the Senate Inquiry into the power of Coles and Woolworths has been met with fear from producers to afraid to criticise the supermarkets.

“WA Farmers wants to work with all food retailers to develop a supply model which ensures locally available product is their preferred source, pricing structures are sustainable and to develop a program which highlights to consumers the source of their product,” Park said.

More meetings are planned between the executives in coming weeks.

Image: News Limited

Kellogg’s to buy Pringles

Kellogg’s is buying Pringles for $2.7 billion, increasing its reach in food sectors throughout the world.

The food giant announced its plans to buy Pringles from Procter & Gamble last Wednesday, following a failed attempt to buy Diamond Foods, the New York Times reports.

Procter & Gamble signed a deal with Diamond Foods agreeing to buy Pringles for about $2.4 billion, mainly in stock in April and Diamond, which had previously acquired Kettle potato chips, was looking forward to obtaining Pringle’s global presence and influence in the grocery market.

But the deal was delayed in the midst of a Diamond was accounting scandal, when questions were raised about how well it paid its walnut growers and by early February, Diamad announced it would be restating its financial statements and placing chief executive, Michael J. Mendes, and its chief financial officer, Steven M. Neil, on administrative leave.

Within hours, Procter & Gamble announced it was considering other options for Pringles.

Kellogg said it would be taking on $2 billion in debt through the new deal, adding to its existing $5 billion in long-term debt.

“We are excited to announce this strategic acquisition,” Kellogg’s chief executive, John A. Bryant said in a statement.

“Pringles has an extensive global footprint that catapults Kellogg to the number two position in the worldwide savory snacks category, helping us achieve our objective of becoming a truly global cereal and snacks company.”

In an interesting analysis on the state of the food industry in the US, the New York Times reports that Kellogg’s moves to advertise sugar and fat-laden foods as healthy is a worrying trend.

“We’re not happy with our performance the last couple of years,” Bryant admitted.

The supermarket sector in the US is also suffering similar issues with private label imitations as many Australian companies.

‘“Here I am, sitting in this office, and in that building, right there,” Mr. Bryant says, pointing to a plant just a few blocks away, “is one of the few private-label cereal plants in the U.S., probably creating 200 million pounds of cereal a year. Because that thing is there, we have to keep bringing new foods to consumers and delighting them, because if we stand still, people catch up,”’ the New York Times reports.

View the full article here.

Coles deals Woollies a blow as supermarket price wars heat up

In yet another controversial action in the supermarket price wars, Coles is launching a loyalty card, not just to their loyal shoppers, but to almost every mailbox in Australia.

The FlyBuys card mail out will be one of the biggest in Australia’s history, with eight million cards set for delivery.

Producing and mailing the cards, and the advertising that goes along with it has cost the supermarket giant a pretty penny; believed to be in the tens of millions of dollars.

But Coles boss Ian McLeod is adamant that the new, simplified card which carried over points from existing FlyBuys cards will make that money well spent.

The new card will double the rewards, with one point earned for every dollar spent, and the ability to cash in the card at the till.

"Instead of waiting three years to earn enough points to buy a toaster, from day one, customers can start earning," McLeod said.

Coles is also embracing web marketing and sales, giving buyers the ability to log onto a website and select deals and convert points.

It follows a spectacular social media fail by the supermarket giant earlier this year, when it asked Twitter users to finish the sentence “In my house it is not a crime to buy…" to which some people vented their spleen about Coles ripping off farmers, putting Australian food producers out of business and the poor food quality, amongst other things.

As part of its FlyBuys relaunch, Coles has also partnered with companies including Webjet, Telstra and AGL.

FlyBuys was launched more than two decades ago and today has amassed more than 5 million active card users.

Are you an active FlyBuys user? Do you agree with Coles mailing the cards to everyone and will it change your shopping habits?

Woolworths sends jobs offshore

Woolworths is the latest food producer to send its operations abroad, as the cost of doing business in Australia continued to increase as the dollar does.

The high cost of manufacturing in Australia has been blamed for several food companies, including Heinz, sending jobs offshore – mostly to New Zealand.

The supermarket giant transferred 40 contact centre jobs to Auckland this week and it will be quickly followed by Imperial Tobacco, which announced it would be relocating its cigarette manufacturing across the Tasman also.

The combination of the high Australian dollar, increases to wages and the supermarket price wars are making it very difficult for food manufacturers to stay afloat.

According to the International Labour Organisation, Australian manufacturing workers earned more than $US35 an hour in 2008, compared to less than $US20 an hour in New Zealand.

Australian manufacturing workers also earn more, on avjeerage, that those in the UK, US and Canada.

In 2010, McCain relocated its vegetable production to New Zealand, leaving Simplot Australia as the largest vegetable producer in Tasmania.

Last year, Foster’s controversially accepted a takeover bid by London-based SABMiller, making Coopers the biggest local brewer, a reputation the company has pledged to maintain.

While the wages in the manufacturing sector are better here than abroad, they still struggle to compare to the high-paying mining jobs, which are seeing countless Australians leave farming and manufacturing jobs behind and relocating to mining towns.

The average age of an Australian farmer is over 60 and a recent study found 75 per cent of Australian year six students think cotton socks are an animal product while others believe yoghurt grows on trees.

Earlier this week, dairy farming was rated the second worst job in the world, based on earning ability, hiring outlook, work environment and physical demands.

”Penalty rates are a significant cost difference to manufacturers, particularly in the agricultural game where you’re unable to properly plan,” Callum Elder, the executive general manager of quality and innovation at Simplot, told the Sydney Morning Herald.

”Our productivity hasn’t increased in the past three to four years, as an industry, but yet we’ve been paying 3 to 4 per cent increases [in wages], which is a large part of the cost.

“It’s very expensive to put people into Australian factories.”