Traditional grocers must act like consumer brands to retain market share

Traditional Australian grocers must respond to customers’ demands or risk losing market share to value-retailers and online grocers, warns The Boston Consulting Group (BCG).

Well-established grocers must re-evaluate their strategy for private-label products, according to the new Why grocers need to start operating like consumer brands report. The report argues traditional grocers should offer products customers truly want rather than products they’ll settle for, and outlines key steps to retain their market share.

Traditional grocers have tried to keep up with competition by launching different tiers and lines of their own private-label products – at low-, mid- and high-level price points – which has led to higher overall sales but makes the supply chain more complicated.

Value retailers, however, are more selective with their products, driving volume through fewer items, reducing operating costs and maintaining quality standards. While this approach has long been recognised as an opportunity for established grocers, they have been slow to act – allowing value retailers to gain a foothold in the market.

“Value retailers like Aldi and IGA are acting less like shop keepers and more like consumer brands that develop products based on what customers want,” said Gavin Parker, Partner and Managing Director in BCG’s Sydney office.

“Using customer insights and efficient, end-to-end value chains, value-retailers are driving quality improvements and operating at cost advantage so it is economically difficult to compete with if you’re operating on a traditional three-tiered structure,” added Parker.

To help well-established grocers retain market share, the report outlines several key steps:

  • Define a clear vision and strategy. Leadership team must establish the aspiration for how the private-label business will fit into the organisation and overall brand architecture.
  • Understand customer needs and build a strong R&D and innovation function. Grocers need to map and prioritise customer demands so they can more effectively meet those needs.
  • Establish a clear value proposition for each quality tier or brand. Companies need to rethink the value proposition for each of their own brands.
  • Consolidate and build scale at the level of individual products and brands. To generate and capitalise on their scale, grocers should consolidate sourcing, testing, quality control, packaging and design, and other functions that apply across categories.
  • Explore partnerships and alliances. Grocers should explore alliances with other players in areas like sourcing and product development.



Majority of fresh meat now bought at Coles & Woolworths

Analysis of long-term market trends shows that for the first time in 2017 Australia’s two largest supermarkets captured more than 50% of Australia’s $13 billion+ fresh meat market between them.

Market leader Woolworths Group with a 26.5% share, up 1.1% points since 2016, and Coles Group with a 24.3% share, up 2% points, had a combined share of the fresh meat market larger than all other retail outlets including rival supermarkets Aldi and IGA, butchers, markets, other supermarkets and other non-supermarkets combined.

Both Australian supermarket giants have enjoyed stronger growth in the fresh meat market over the past year than rival Aldi which now has a 9.6% share of the fresh meat market, up 0.9% in a year – although all three have clearly taken substantial market share from traditional butchers.

Ten years ago butchers and markets had nearly a third (32%) of Australia’s fresh meat market. Today this is just under a quarter (24%) of the fresh meat market is now held by butchers and markets.

In the last 12 months fresh meat market share for butchers and markets dropped 3% points. This is steepest drop of any time period in the last decade.

These results are from the Roy Morgan Single Source survey of over 50,000 people per annum, including over 12,000 grocery buyers.

Michele Levine, CEO, Roy Morgan, says Australia’s increasingly competitive fresh meat market is squeezing the market share of the traditional Australian butcher:

“Australia’s ‘Big Two’ supermarket chains Woolworths and Coles now capture over 60% of Australia’s $100b+ grocery market. In recent years the Big Two have been moving to consolidate their market shares in various fresh food markets including fresh fruit & veg, fresh meat, fresh bread, fresh deli and fresh seafood,” she said

“In just the past year Coles and Woolworths achieved a milestone, capturing a majority of the fresh meat market for the first time and now hold 50.8% of Australia’s fresh meat market between them. Woolworths’ fresh meat market share of Woolworths has increased 1.1% points over the past year to 26.5% while Coles has continued a decade long-trend by increasing its market share by 2% to 24.3%.

Australian fresh meat market 2016 v. 2017


Source: Roy Morgan Single Source Australia, January 2016 – December 2016, n=8,301, January 2017 – December 2017, n=8,691. Base: Last 7 day fresh meat purchasers aged 14+ weighted to Australian households.

Grocery clearance store business NQR sold

Grocery clearance store business NQR has been sold as a going concern and will continue to operate.

Bruno Secatore and Luke Targett of turnaround, restructuring and insolvency advisory firm Cor Cordis were appointed as Administrators of the Australian-owned NQR Grocery Clearance Stores business on 24 January 2018.

NQR offers a simple and effective clearance solution for manufacturers, wholesalers and retailers, offering big brand products at cheap prices across Victoria. The business has continued to trade throughout the Administration period from its remaining 14 stores, after four stores were closed shortly after the appointment.

“Following a process of making improvements to prepare the business as an attractive asset for sale, we are very pleased to be able to announce that an agreement to sell the business as a going concern has been successfully negotiated,” Cor Cordis Partner Luke Targett said.

“We consider this to be a very positive result given the tough retail environment. We appreciate the unwavering support of the NQR staff, suppliers and loyal customers. We are pleased that the long established business will continue to provide a niche offering to the community and that so many jobs have been saved,” he said.

Based in Melbourne, the company currently has almost 200 staff, both in retail and administration.

The Purchaser will take day-to-day control of the business from 12 April 2018 by way of a License Agreement with completion of the sale expected to occur immediately prior to the second meeting of creditors around mid May 2018.

A spokesman for the entity that has purchased the NQR business – a private equity group run by like-minded deep discount professionals – said that they look forward to reviving the NQR business, a true Australian owned discount grocery business, with a key focus on delivering unparalleled savings to everyday customers.

“In the coming weeks there will be a formal announcement from the incoming CEO who will announce exciting news for all customers, suppliers & partners of the NQR business,” the spokesperson said.

The NQR business will continue to operate as normal and will be focused on offering great discounts on leading grocery items to all its customers.

Woolworths first-half profit up 38pc

Woolworths’ first-half profit has risen by 38 per cent to $969m and the supermarket giant has also recorded a 3.8 per cent increase in sales.

The company also announced a dividend per share of 43c, up 26.5 per cent.

“At the end of FY17, we said that we were moving from turnaround to transformation. In the current half we have seen some early signs of this transformation with good progress on a number of strategic initiatives and pleasing sales growth from all of our businesses. We remain committed to our focus on building a customer and store-led culture and team with a highlight in the half being the continued improvement in customer, team and supplier advocacy scores across the Woolworths Group,” said Brad Banducci, Woolworths Group CEO.

“In Australian Food, despite beginning to cycle some more challenging prior year numbers, sales increased by 5.1% with a strong second quarter (comparables sales: +5.0%). EBIT increased by 11.1% due to strong sales and continued improvement in stock loss despite investment in key strategic initiatives such as digital, incremental team training and IT as well as higher depreciation costs.”

Amazon’s Australia launch “really, really close”

E-commerce giant Amazon is “really, really close” to launching both its retail and marketplace offerings in Australia, the company’s Australian country manager told a gathering of sellers in Sydney today.

While Rocco Braeuniger (pictured) could not provide the 600-strong audience with an actual start date for the company’s local operations, he did confirm that Australia will become the 13th country in which it operates.

The event was organised in partnership with the Australian Retailers Association (ARA) and the SME Association of Australia (SMEA) and was intended to explain how businesses, big and small, can use Amazon Marketplace to grow.

“We held the Seller Summit to encourage and educate Australian businesses on how they can use Amazon Marketplace to take their products to a global audience. With more than half of units sold globally coming from Marketplace sellers, we know that customers love the unique selection that they bring,” said Braeuniger.

“We are excited to work with many thousands of Australian businesses to help them reach more than 300 million customers around the world and to grow their business.”

Apart from Braeuniger, Head of Amazon Marketplace in Australia, Fabio Bertola also addressed the audience. He offered practical guidance on how businesses can take their businesses to millions of customers across Australia and around the world via Amazon Marketplace.

Successful Australian businesses including baby brand from Bondi, Hip Cub, also took to the stage to provide firsthand insights on their own experiences selling on Amazon globally.

Since the launch of its Marketplace in 2000, Amazon has helped businesses around the globe to increase sales and reach new customers. Sales from Marketplace sellers now represent over 50 per cent of all items sold on Amazon websites globally.

Amazon Seller Summit_Panel_wide




Woolworths posts $1.5b profit

Supermarket giant Woolworths has posted a full-year profit of $1.5 billion, a big change from last year’s $1.2 billion loss.

The company said in a statement revenue was also up 3.7 per cent to $55.9 billion. In addition, sales of Australian food gained momentum, with fourth quarter Easter adjusted comparable sales growth of 6.4 per cent.

“FY17 was a year of rebuilding the foundations of our business and we are pleased with our progress over the last 12 months, particularly in the second half. Encouragingly, we still see many opportunities to improve our business going forward and are focused on our five key priorities,” said Brad Banducci, Woolworths Group CEO.

“Our first priority is to build a customer and store-led culture and team. The key highlight in FY17 was the meaningful improvement in customer and team scores across the Woolworths Group. Over 116,000 employees provided feedback in our recent VOT survey with our sustainable engagement scores improving by five points over the last year to 82 per cent.The improvement in safety was another highlight with a 20 per cent improvement across Woolworths Group.”




Online grocery store heads to Sydney to compete with supermarket giants

NSW shoppers now have an online alternative to Coles and Woolworths, with The General Store now open for business.

The General Store is an online-only supermarket developed by the team behind Aussie Farmers Direct, carrying over 4,000 grocery brands. It promises low prices and hundreds of specials and ‘bulk buys’ not available in supermarkets.

The range complements the hundreds of fresh produce lines sold through Aussie Farmers Direct, and gives customers an online alternative to Australia’s supermarket duopoly.

The NSW launch of The General Store is the next stage of a planned national store rollout, following its successful debut in Victoria. Aussie Farmers Direct CEO Keith Louie said thousands of Victorian shoppers were now switching from the supermarkets and getting all their fresh produce and grocery lines delivered to their door.

“We’ve been thrilled with the response to The General Store in Victoria. Our customers have loved being able to add all their grocery and household needs to their regular Aussie Farmers Direct order, saving themselves a trip to the supermarket,” Louie said.

He said that the online store will make it easy for customers to make informed purchasing decisions, with shoppers being able to sort products in an ‘Australian first’ order.

“In The General Store, we will look wherever possible to support Australian food and grocery manufacturers, and we’ll also donate 10% of the profits from imported products to the Aussie Farmers Foundation, which supports charities and grassroots community groups making a real difference in rural Australia,” Louie said.

He said the combined offers gave Australian food and grocery manufacturers an alternative path to market that bypasses Coles and Woolworths, and gave prominence to Australian-grown and Australian-made products.

Independent supermarket group reveals new strategy

Independent retail supermarket group, Australian United Retailers (AUR), the company behind ‘FoodWorks’, will roll out three new FoodWorks formats from 2017.

The company said in a statement that the three formats had been developed to cater for the changing needs of its customers and the different ways people shop.

The relaunched formats will be:

FoodWorks Supermarkets – targeted to families and the primary shopper in major cities/towns. Core range includes extensive offerings across all departments, with a heavy fresh food focus.

FoodWorks Local – targeted to families/elderly couples living in regional areas, as well as holiday makers/visitors depending on the location/demographic of the store. Core range tailored to location and could be a mix of all departments as well as impulse categories, with a strong fresh foods focus.

FoodWorks Express – targeted to a transient customer base, which includes a combination of passing traffic, public transport users and local residents. Core range focus centred around impulse categories such as confectionery, soft drinks, fresh and on-the-go meal solutions.

“We now have access to the most up-to-date detailed data and analytics from Summit Insights that tells us so much more about what our customers are buying, when they are buying products and what types of stores work best in certain locations,” said AUR Chief Procurement & Commercial Officer, Anthony Abdallah (pictured).

“One retail format no longer caters for the evolving shopping habits of our customers and these new formats have been specifically developed to take our business into the future by responding our offer to the needs of the communities we service.”



Income squeeze sees households spending less on food

Weak underlying income growth is squeezing retail turnover in food categories, while non-food categories are still benefiting from low interest rates and asset price inflation.

A report by Deloitte Access Economics has found that, overall, real (inflation-adjusted) retail sales growth was 2.5% over 2015-16, which was a moderated rate compared with the 3.3% growth seen over 2014-15. We expect that retail sales growth could slow further to 2.0% over 2016-17, before recovering somewhat to 3.0% over 2017-18.

Interest rates are expected to be ‘lower for longer’, as inflation is barely registering and, while growth is OK, it is below trend globally and at risk of returning below trend here.

As interest rates fall, asset prices rise. Share market values have moved up in August despite a lack of equivalent strength observed in profit reports, suggesting that share prices are being driven by cheaper finance rather than better returns. And house prices have been rising for some time now, but the still strong house price growth in Sydney and Melbourne (despite increases in new supply) suggests there may be overvaluation in this market as well.

For now, weak underlying income growth has slammed food retail, but low interest rates and asset inflation are saving non-food sales. In total, the value of non-food turnover increased by 3.4% over the year to June 2016 in real terms, while food turnover growth was just 0.7% for the same period.

While supermarkets have survived the competitive environment by pushing down supplier prices, costs may not have much further to fall and profits are being squeezed. Supermarket and catered food operators are now relying on population growth to increase their sales, as real retail turnover per capita decreases.

Australia’s non-food retail spending has moved on from household goods. Last year, the strong growth in housing activity spurred household goods turnover, while this year is characterised by growth in apparel and department stores. These new growth categories are driven as much by supply side circumstances as they are by demand. Transformation strategies by Myer, David Jones and Kmart/Target, as well as the hype surrounding competitive international fashion entrants has had a huge effect on turnover in these categories.

Retail turnover by State is characterised by a two-speed split. Slowdown in resource rich States (Western Australia, Queensland and the Northern Territory) is contrasted by stronger conditions in the likes of New South Wales and Victoria. That is a direct reflection of the shift from a mining construction boom to a housing construction boom, with the big States of the south and east getting the upside from that baton pass.


Woolworths private label strategy will play directly into the hands of Aldi

Woolworths’ plan to rebrand its private label ranges in an attempt to meet changing shopper demands and combat the growth of Aldi will simply play into the hands of this German discounter.

This new strategy, a replication of what Coles did in November 2015, will see their existing “Homebrand” and “Woolworths Essential” product ranges combined under the “Essentials” brand name. However, in focusing on price and private label ranges, supermarkets are in a race to the bottom where there are no points of difference in products except for price.

The risks with the private label strategy

The fastest, although not the smartest, way to compete with a competitor like Aldi is to replicate; and that’s exactly what Woolworths and Coles have been doing for the past five years. With both major supermarkets driving a message of “price” and increasing their private label ranges, more shoppers also started frequenting Aldi.

Internationally, grocery discounters like Lidl and Aldi continue to steal market share from the major full-line supermarkets, while supermarkets continue to discount heavily. The practice of deep discounting and private label expansion limits the differentiation between the grocery players and accordingly reduces shopper loyalty. As such, with no supermarket providing a point of difference, more and more customers simply shop around for the lowest price.

The problem with “no-name” products

Franklins No Frills was Australia’s first low-cost grocer, with a narrow range of very low priced, generic, “no-name” grocery products. This concept of “no-name” products was new to Australian shoppers at the time and Franklin’s market position initially worked in its favour.

However, Aldi’s entry into the Australian market in 2001 changed the way we looked at private label products. While Woolworths “Homebrand” and Coles “Smart Buys” prices were generally as cheap, if not cheaper than similar entry-level private label products at Aldi, consumers considered the quality of these basic “no-name” products to be substandard to higher tiered private label products.

These lower perceptions are related to packaging. In a low involvement, routine shopping task, supermarket shoppers will often employ simple logic (often brand or price) to determine quality and aid selection.

Woolworths “Homebrand” and Coles “Smart Buys” were designed in plain packaging with no pictures to infer low price. However, shoppers also related low price and plain packaging to mean low quality.

In contrast, Aldi’s private label ranges mimic nationally branded products. As such, shoppers perceive Aldi’s private label ranges to look similar to the nationally branded alternative and correlate quality. The lower price then creates a positive value experience for the shopper.

Woolworths’ new strategy equally is about improving perceptions of brand, through new packaging, while maintaining, or even lowering price.

The rise and rise of supermarket private labels

Aldi has legitimised private label products and forced other players to lift their game. This left Coles and Woolworths scrambling to improve the quality and packaging of existing home brand ranges.

Where once private label grocery products were considered a “cheap and nasty” alternative for the branded product, supermarket quality assurance teams have changed this mind set. Today’s supermarket private label products, offer quality on par with national branded alternatives, with some, so closely resembling the market leader, one would be forgiven for grabbing the wrong box.

Australian consumers appear to be warming to the supermarkets’ private label products. Research last year indicated that the number of Australians who tend to buy private label groceries over big name brands rose from 44% to 65% in the space of just six months. In comparable markets, like the UK, the proportion of private label sales is almost at parity with national branded products and across Europe, countries like Switzerland and Spain have already reached more than 50%.

The strategy of increasing the proportion of private label products will meet the needs of shoppers who seek value over brand, but also provides sufficient margin to allow supermarkets to slash prices further.

How will private label impact supermarkets in the future?

When it comes to choice in the supermarket, some is certainly better than none, but more is not necessarily better than less. Australian shoppers can expect less choice in the supermarket of tomorrow and this may not be a bad thing.

For many years, Australian supermarkets promoted vast ranges of brands and products, believing that broader, deeper ranges would satisfy shoppers. However, recent research suggests that, psychologically, this assumption was wrong. In fact, shoppers faced with excessive choice found it difficult to choose and were less likely to purchase.

Aldi has demonstrated the power of “less”. Selling only 1700 products, the supermarket’s small ranges may deliver less choice, but saves shoppers time, this creates less confusion and satisfies most.

Globally, where German discounters like Aldi or Lidl have entered the market, incumbent supermarkets have slashed range. Recently, Tesco cut 20,000 product lines from their 90,000 range, similarly Coles in 2012 reduced its range by some 7,000 products.

While this strategy responds to customers who are looking to make their grocery shopping more efficient, it also reduces supply chain costs for supermarkets.


Gary Mortimer is Senior Lecturer, QUT Business School, Queensland University of Technology.

This article first appeared in The Conversation. Read the original here.

SAI Global appoints new food safety expert

SAI Global has announced the appointment of Dawn Welham as Global Technical Director and Thought Leader, continuing to expand its expertise in Retail, Food and Agribusiness industries.

With a wealth of experience across food product safety, public health, consumer protection and occupational health and safety, Dawn will use her expertise across 100 countries, with a focus in Asia-Pacific, the Americas and Europe, and continue growing the company's capabilities in product safety.

Businesses are focusing more on embedding product safety processes and culture as food provenance, safety and integrity become more important to consumers.

According to Dawn, SAI Global is taking a leading role in providing risk management solutions to Retail, Food and Agribusiness industries, to ensure product integrity and safety.

"True technical leadership is about putting systems in place to make sure customers get what they pay for. They pay for quality, legality and safety, and my new role will be focused on all aspects of this compliance for many large businesses around the world," Welham said

"An effective technical system is one which takes the complexity out of compliance, but also creates a competitive advantage for the business. This is paramount to the way SAI Global works and is the part that makes my new role very rewarding and exciting."

Melbourne-based premixed snack line now available in over 100 retailers

Since launching in May 2014, Melbourne-based, healthy, premixed, snack brand, Funch has seen rapid growth, expanding their product line from two to eight, and increasing their stockists to nearly 100 outlets, all within 15 months.

Funch is the brainchild of the locally born and bred, energetic and entrepreneurial duo, Tanya Duncan and Lisa Bourne.

“When Funch first hit the shelves we had to spend a lot of time explaining the concept,” Funch Co-founder, Lisa Bourne said.

“People weren’t expecting to find such a healthy, wholesome snack that tasted amazing and was simple to make. Back then, healthy snacks in this ‘premixed-make-it-at-home’ space didn’t exist.”

With a local organic health food store the first to give the Funch products a go, Lisa and Tanya spent hours standing in stores handing out samples and explaining just how simple the products were to make.

“In store tastings have been fundamental in the growth and uptake of the Funch range. We find that people are open to the Funch range once they’ve read the list of clean ingredients and taste just how delicious they are,” Lisa said.

Through Funch, Lisa and Tanya support people who are looking to make healthy food choices, but due to a lack of skill, knowledge, confidence and time, need an easy and convenient option.

“Funch is all about supporting people like us who are doing their best to make healthy choices so all of our ingredients have a health offering. We want each of our products to bring benefits that stretch well beyond an amazing taste,” Lisa said.

 “The Funch line is a reflection of the everyday need that myself, and so many others have, to keep our diets healthy while within the constraints of a busy lifestyle,” Tanya said.


ACCC working to ensure a successful Food and Grocery Code

The Australian Competition and Consumer Commission has reassured the Australian Food and Grocery Council (AFGC) that it will do what it can to ensure the Council’s Code of Conduct succeeds.

At an industry forum held in Canberra, ACCC Chairman Rod Sims said that the Code can redress the imbalance in bargaining power existing between suppliers and large grocery suppliers.

According to Mr Sims, “Ensuring suppliers are aware of their rights is crucial to the success of the Code. Our public action was designed to help with this.”

Plans to increase focus on the agricultural sector were also outlined, with further discussions to be held concerning the proposed changes to the country of origin labelling regime and the role of regulators. 

ALDI begins Western Australia management hiring drive

ALDI Australia is commencing recruitment for almost 400 new positions across Western Australia, as it prepares for statewide expansion in 2016.  

From today, ALDI has opened applications for Store Managers and Assistant Store Managers. Other roles including Trainee Store Manager and Store Assistant positions will open from December 12.

“As one of the country’s fastest growing retailers, ALDI is looking for dynamic, enthusiastic and ambitious people to help bring the ALDI difference to Western Australia,” said Viktor Jakupec, ALDI Managing Director – Western Australia. 

“ALDI employees are highly motivated and dedicated to delivering the best shopping experience to our customers. In return, they are provided with rewarding careers, development opportunities and industry-leading employment benefits.”

As part of its commitment to staff, ALDI offers paid maternity leave (18 weeks at half pay), five weeks annual leave for full-time employees and salaries that are well above industry standards. 

New employees will undergo extensive training to learn the ALDI way of doing business.  West Australian Store Managers and Assistant Store Managers will also receive in-store training at one of ALDI’s existing stores on the eastern seaboard. 

“Our commitment to the personal development of ALDI employees starts from day one,” Jakupec said. “ALDI’s training program sets our employees up for career success. We’ve enjoyed seeing our staff grow alongside our business and independent employee surveys have consistently shown high levels of job satisfaction.” 

As ALDI’s West Australian expansion continues to progress, confirmed locations of interest include Nedlands, Lakelands, Belmont, Australind, Mandurah, Cannington, Camillo, South Lake, Haynes, Halls Head, Wattle Grove, Lakeside Joondalup, Midland, Rockingham, Ellenbrook, Southern River, Busselton, Kwinana, Maddington, Mundaring, Secret Harbour and Waikiki.

Federal ministers give a cluck about egg rip-off

Consumer advocacy group Choice has welcomed today’s start of consultations on free-range egg labelling as the next step in ending the ‘free-range’ rip off.

Choice says that the consultation paper, released by the Hon Kelly O’Dwyer MP on behalf of the nation’s consumer affairs ministers, paints a clear picture of the current free-range farce and identifies options for unscrambling the problem.
“As the consultation paper shows, an increasing number of Australians are paying a premium for eggs labelled free-range without having any certainty they’re getting what they pay for,” said Matt Levey, Choice Director of Campaigns and Communications.
“In the absence of a national, enforceable standard for free-range, it is relatively easy to mislead consumers, and unfortunately there is a financial incentive for some producers to do so. The result is that consumers lose, as do producers of genuine free-range eggs,” Mr. Levey said.
The consultation follows a Choice investigation in June this year estimating a minimum of 213 million eggs sold in Australia last year under the 'free-range' label failed to meet consumers' expectations of the free-range claim.
“Based on consumers’ expectations, it’s estimated Australians could be paying between $21-$43 million per year for eggs that aren’t the real deal,” Mr. Levey said
“It’s a rip-off that distorts the market and undermines competition, and that’s why it’s so important that governments step in and agree a genuine free-range standard that reflects what consumers expect.

“Our research has shown that 84 per cent of egg buyers agree that a mandatory national standard is needed while only 2 per cent did not believe there should be a standard. Clearly it’s time to get cracking.”
With consultations open until 2 November, Choice is calling on consumers to support a genuine standard and contribute to a free-range information campaign.
"Support for the campaign has been overwhelming with consumers already donating almost $9,000 to send a message to government that they want real free-range," said Mr. Levey.


All out of fresh ideas: how supermarket giants send mixed messages about food

Fast food giant McDonald’s has been under a cloud in recent years as its US customers turn to alternatives. In this “Fast food reinvented” series we explore what the food sector is doing to keep customers hooked and sales rising.

Australia’s two main supermarket chains Coles and Woolworths' representation of “fresh” and “local” food reflects heightened interest among consumers about these values. But they also contribute to concerns about food production and the supply chain.

Both have employed celebrity chefs with a reputation for caring about such matters. When he joined forces with Woolworths, UK chef Jamie Oliver explained:

part of what I’m doing with Woolies is looking at standards, and ethics, of where our sort of food comes from.

But when pressed on the demands Woolworths had made for farmers to surrender some of their profits to pay for his campaign, Oliver said he was just an employee.

The problem is that his claims and the supermarket’s promotion suggest that standards and ethics – as well as the growers asked to fund messages about themselves – are well regarded by the public. This is due, in part, to the strategies of producers and small retailers that the two supermarkets have appropriated to win the custom of consumers who care where their food comes from.

Private labels

Consider the case of Macro foods: the chain, rebadged as Thomas Dux, an urban store format, was a shift from the freestanding supermarkets established in the 1960s. When it was bought out by Woolworths in 2009, Macro founder Pierce Cody saw the sale of the chain as evidence of the work they put in:

to take organic to a large-format, mainstream model rather than little folksy corner stores.

The chain was used to test the market for Woolworths' privately labelled gourmet goods. And Coles has its own organic label.

The proliferation of privately labelled goods (which are made by one company for offer under another company’s label) has diminished the product range offered by supermarkets. Coles’ product range, for instance, dropped by 11% between 2010 and 2012.

Private-label items, produced in conjunction with specific suppliers, compete directly with other products in the range, dominating shelf space and usually offering a lower price. And this is only one part of the pincer movement reducing the number of suppliers.

Australia’s largest dairy company, Devondale Murray-Goulburn, may grow from the exclusive deal it has struck with Coles to provide milk, for instance, but in the process it reduces the number of milk suppliers in the market.

A fairer go for farmers

Supermarkets use the romantic image of the small family farm to play up their close relationship with farmers and suppliers. But it’s also employed in arguments for reforming the sector, because of the commercial disadvantage small family farms have in the domestic food system.

The Agricultural Competitiveness White Paper released earlier this year, for instance, recommends a new commissioner dedicated to agriculture and a more “farm savvy” Australian Competition and Consumer Commission (ACCC) to encourage fair trading.


Both Coles and Woolworths have employed celebrity chefs, such as Jamie Oliver, with a reputation for caring about fresh and local food. Scandic Hotels/Flickr, CC BY-NC


The aim is to strengthen competition in agricultural supply chains, which will engage the ACCC more directly with supermarkets. And the first priority is to help farmers achieve a better return for their produce. But this is only one sign that Woolworths and Coles face a political environment that is increasingly hostile to their sourcing policies (as well as growing consumer scrutiny).

The code of conduct for grocery wholesalers and retailers (Food and Grocery Code), for instance, discloses the existence of practices by grocery retailers and wholesalers in their dealings with suppliers, which motivated its development. It mentions “preventing a supplier from fulfilling obligations” by placing their products behind other competitors’ products on shelves such that consumers cannot see them, and “payment for wastage” that occurs at the retailer’s premises.

While the code fails to address the inequality of market power in the supply chain, it does reflect the challenging environment in which Australian farmers and suppliers now operate.

Public concern

Marketing by supermarket giants highlights public interest in food production, supply and retailing. When Woolworths brought back its “Fresh Food People” campaign last year, the advertising featured a range of products from farm to store complete with “fresh food stories” of individual farmers.

But the UBS Supermarket Supplier Survey tells a different story; Woolworths' rating on quality of fresh food produce lags behind Coles.

Besides selling the brand of Woolworths, the marketing also appropriates the ideal of farming and relationships with suppliers to sell products. The company considered a “local” retail brand in 2013, in addition to its other labels such as Macro and Woolworths Select.

This suggests Woolworths still believes it can increase or maintain its market share with buzzwords despite how incongruous these sound coming from a supermarket giant. But while local might be more important to consumers than fresh, supermarkets are falling behind the innovations of local food producers to create a fairer food system.

Coming out on top

Supermarkets have tried to tailor their products to include organic, natural and local foods to meet consumer demand. But while Coles and Woolworths control 80% of the grocery market, they have 45.5% of the market in fruit and vegetables and 47.2% of meat.

The imbalance in market power favours the duopoly. But eaters are still choosing to buy their fresh food at local fruit and vegetable shops, butchers and farmers' markets. There, they can engage directly with the people who grow their food and not just see representations of them.

A survey undertaken last year on behalf of the Australian Farmers’ Markets Association, for instance, found that 14% of respondents typically buy their vegetables at a farmers’ market.

Supermarkets have stopped merely copying each other: from liquor to petrol to hardware. It’s clear from sales, from how they advertise and from consumer concern about food security and food sovereignty that what they really need to worry about is the combined agency of farmers and the power of consumers. Put together, the story isn’t so gloomy for the food sector.

The Conversation

Adele Wessell, Associate professor

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

Krispy Kreme helps to grant more wishes

Krispy Kreme is joining forces with doughnut-loving fans and Make-A-Wish supporters, to raise as much money as possible for the children’s charity.
During September, $1 from every Star Doughnut sold in store and online will be donated to Make-A-Wish. Beyond this, Krispy Kreme doughnut-lovers can continue to support Make-A-Wish throughout the year, with Krispy Kreme also donating $6 from every dozen pack sold online, and $1 from every co-branded enviro-bag sold in store.

Krispy Kreme Australia’s CEO, Andrew McGuigan, said the company is delighted to combine the fun of Krispy Kreme with a cause like Make-A-Wish Australia.
“We’re really proud and excited to be supporting Make-A-Wish. Giving back to the community is part of our global mission. A charity partner like Make-A-Wish really inspires us to do more, give more, and gets all our team at Krispy Kreme involved in helping seriously ill children,” said Mr McGuigan.
Make-A-Wish CEO Gerard Menses is very pleased to have Krispy Kreme’s support again in 2015.
“Krispy Kreme is a fantastic supporter of Make-A-Wish, and we’re thrilled to partner with them. The money raised by the Star Doughnut initiative will help us grant even more wishes to children with life-threatening medical conditions.
“We have an ambitious goal of granting 2000 wishes per year within the next decade, so that every child in Australia battling serious illness can experience the healing power of a wish. The funds raised by Krispy Kreme customers will help us inch closer to that goal,” he said.
This year, Krispy Kreme is dedicated to raising over $100,000 for Make-A-Wish Australia. Make-A-Wish grants the wishes of very sick kids and teenagers, giving them hope for the future, strength to face the challenges of their illness, and joy from their incredible wish experience.