The debate over supermarkets increasing the number of private label products on shelves is still continuing.
The big two have copped criticism for the inundation of private label products, with Australian manufacturers saying they will not survive the supermarket wars.
One of Australia’s biggest food manufacturers, HJ Heinz has been very vocal about the move, saying the supermarket giants have created an “inhospitable” environment for Australian companies.
Yesterday the major supermerkets were accused of deliberately copying the design of well-known products to trick consumers into buying private label.
The Australian Food and Grocery Council (AFGC) commissioned a study that showed 130 000 people will be out of work in the food and grocery sector by 2020 if the supermarkets continue the way they’re headed.
It welcomed comments from Senator Kim Carr earlier this month, when he told the Industry Leaders Forum he was “particularly concerned about the market dominance of the two major supermarket chains – who now control 80 per cent of retail food sales in this country.”
The Minister for Innovation, Industry, Science and Research has expanded on his comments in an interview with the ABC yesterday, saying people need to consider the long term impacts of the supermarket dominance.
“Home brands have the potential to actually squeeze their margins, squeeze their capacity to invest, squeeze their capacity for innovation and undermine their capacity to build a platform upon which they export,” he told ABC Radio.
“It’s a question of short term versus long term here.
“You have to think about where your products are coming from.
“You want to know the quality of the products that are being provided to you and you want to know under which these – the terms that people actually are producing those products.
We have long said that we don’t want to buy products from sweatshops.
“We’ve long said that we want people to trade in an ethical way, in many areas.
“Why wouldn’t we argue the same? And I’m sure most Australians would argue the same when it comes to where their groceries are made.”
Carr could not provide a figure on how many products on shelves should be private label or not, but did say the Australian Competition and Consumer Commission will be investigating the matter.
“My concern – there is a legitimate place for private labels,” he said.
“It’s the question about how – what level of domination they should have on the supermarket shelves.
“We all know the experience of going to the supermarket and not being able to find the brand that you’re used to or the one that you’ve come to rely upon.
“We know what’s happening in terms of the constriction of choice that’s actually occurring and I think that many Australians would be concerned to ensure that there is a legitimate range of options available to them.
“Remember, the two big supermarket chains control 80 per cent of what’s sold in this country.”
The full transcript, as it appeared on the Minister’s website is below.
TRANSCRIPT 702 ABC SYDNEY
28 Nov 2011
SUBJECT: Supermarkets and food industry concerns
INTERVIEWER: Philip Clark
CLARK: Big supermarkets – are the shift to private labels squeezing out Australian brands? Kim Carr is the Minister for Industry, Innovation, Science and Research and he joins me on the line this morning. Mr Carr, good morning to you.
CARR: Good morning.
CLARK: Home brands are a commercial decision by supermarkets. Is that how we should leave it?
CARR: They’ve been around for a very long time but what we are now seeing is a decision by the major supermarkets to extend their reach and perhaps get up to where the British are, that is somewhere around 40 per cent of the supermarket shelves and that may well pose a very serious problem for a lot of our manufacturers.
CARR: Because there are 20,000 companies working in the food industry in Australia, employs about 225,000 Australians and, of course, they rely upon the supermarkets for access to the marketplace to sell their products.
Home brands have the potential to actually squeeze their margins, squeeze their capacity to invest, squeeze their capacity for innovation and undermine their capacity to build a platform upon which they export.
So the question of the terms and conditions under which these 20,000 companies are able to sell their products to the Australian people is a matter of vital concern to us all.
CLARK: Nevertheless, local manufacturers are in the marketplace competing with everyone else, aren’t they? They’ll sink or swim on the quality of their products and their attraction to consumers, won’t they?
CARR: That’s the whole point. If there’s no brand, if there’s no identification of where that product comes from, if it’s easier to actually import materials from overseas, then the whole question of competition is, in fact, constrained. What you’re looking at here is not an opening up of choice but a reduction in choice and a hollowing out, the potential for the hollowing out of Australian manufacturing which is a very important question in terms of the quality and the price of food we pay into the future.
CLARK: Consumers listening to this might say, well, that’s all very well but it’s a marketplace out there and as far as we’re concerned it’s giving us access to cheaper food.
CARR: Well that’s…
CLARK: And that’s got – that’s got to be a better thing.
CARR: It’s a question of short term versus long term here. You have to think about where your products are coming from. You want to know the quality of the products that are being provided to you and you want to know under which these – the terms that people actually are producing those products.
We have long said that we don’t want to buy products from sweatshops. We’ve long said that we want people to trade in an ethical way, in many areas. Why wouldn’t we argue the same? And I’m sure most Australians would argue the same when it comes to where their groceries are made.
CLARK: At the end of the day though, supermarkets will buy and source their materials where they want and you’re not really planning or proposing to do anything about that, are you?
CARR: No, we’re not saying that we are going to try to change the commercial arrangement that people make. What we’re saying is that there has to be fair and reasonable terms of negotiation.
Now, the series of complaints that are put to me from reputable companies representing a very broad spread of companies, suggest to me that there is serious cause for concern and that’s why I referred the matter for the ACCC to look at.
We need to know whether or not there is independent evidence to verify these claims and then we need to know whether or not the current legal framework is appropriate.
CLARK: In other words, the existing measures in place, the Trade Practices Act and other legislation, are the way to go forward here, not – not new – you’re not proposing new regulations.
CARR: Well, we’ve seen an evolution of the regulatory arrangements in this country over time and we know that as market conditions change, as business practices change, the law has to keep up with those changes.
But we have to identify first of all – or we have to verify whether or not these allegations are right. We have to then look at whether or not practices that have been engaged in are legal. Then we have to examine whether or not they’re ethical and that’s a different question again.
CLARK: What’s the correct level of private labels in a supermarket shelf?
CARR: We have no determined position on whether or not a set number of private labels should be available. My…
CLARK: What do you – what do you think?
CARR: My concern – there is a legitimate place for private labels. It’s the question about how – what level of domination they should have on the supermarket shelves.
We all know the experience of going to the supermarket and not being able to find the brand that you’re used to or the one that you’ve come to rely upon. We know what’s happening in terms of the constriction of choice that’s actually occurring and I think that many Australians would be concerned to ensure that there is a legitimate range of options available to them.
Remember, the two big supermarket chains control 80 per cent of what’s sold in this country.
CLARK: Should we do something about that?
CARR: Well, that’s another issue but we need to first of all establish what is the truth of these allegations and upon that we can debate the issues.
CLARK: But you said – but – I know but you seem to be suggesting if we’ve got the cart and the horse, let’s get to the cart which is the domination of the retail grocery sector by two big companies.
CARR: In the first instance I’ve had a series of complaints put to me as the Minister for Innovation. I have then referred those to the relevant regulatory authority. We await – we’ll await upon their call as to the accuracy of those claims.
I am sufficiently concerned about the breadth and the nature of the allegations to actually take action but we are – I’m not the judge and jury on this question. Others have to make that call and that’s the first thing we want to establish.
This is not about – or just about consumer rights. It’s about the capacity of our country to be able to produce food, to feed our people and to export to feed other people around the world.
CLARK: But that’s not in doubt though, is it? We’re an efficient…
CARR: Yes, it is in doubt. Yes, it is in doubt.
CLARK: We’re an efficient food producer and in the marketplace for internationally traded goods if we’re efficient and a low cost producer we’ll find our place in that market. If we’re not we won’t, regardless of what you want to do about it at a government level.
CARR: Well, these things don’t happen by divine intervention. They happen as a result of building capacities, building the skills, building the business practices, having the foundations upon which to build your market share and that’s what we have to look to. We have to ensure that the 20,000 businesses that are engaged in food production in this country and the 225,000 Australians that actually make those companies work, have the capacity to participate in the marketplace and that’s really what this is about: building capacity, building our innovation skills and ensuring that we have the foundation stones to build the industry.
CLARK: All right. Good to talk with you, Minister.
CARR: All the very best.
CLARK: Senator Kim Carr, he’s the Minister for Industry in the Federal Government.