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Horticulture industry continues to focus on the supermarkets’ practices

Industry Advocacy

As we have highlighted regularly, the number one challenge for the entire horticulture sector, not just apples and pears, is that growers cannot get a fair price for their produce. And without a fair price, everything else becomes secondary.

While this sounds like a dramatic statement, in a market where there are two overwhelmingly dominant players, there is a real risk that growers’ margins can be simply absorbed by the supermarkets setting low weekly buying prices. And there are few in the industry that do not consider that Coles and Woolworths have this power and set the price.

To restate the problem, when we talk price in Australia, all roads lead to Coles and Woolworths, because they control the market with a 65 per cent market share. This makes them both one of the largest retail duopolies in the world, as well as one of the most profitable.

And unfortunately, Australian growers are more exposed to the supermarkets than almost any other sector due to three factors.

Firstly, for the majority, there are no viable exports and therefore they are heavily reliant on the supermarkets.

Secondly, the product is perishable – once you pick it, or it is ripe, the clock starts ticking. This is made worse as there is little or no branding, so the sector’s product can be traded off against everybody else’s. This is the one overwhelming factor that makes the horticulture sector stand out and why the government should act.

Thirdly, it is typically made up of highly fragmented, small, family businesses scattered in regional areas, with few having access to pricing data, unlike the retailers who control it all.

The weekly buying cycle, managed by the retailers, compresses the decision time of sellers, who are confronted with some key decisions.

Firstly, if the grower does not accept the price, they might be seen as ‘difficult’ and they worry about being ‘cut out’ going forward.

Secondly, their product is perishable – it needs to be moved (something, no doubt, that is not lost on the buying teams).

Thirdly, growers need the cashflow because the majority of costs are incurred months before.

To make matters worse, the supermarkets possess a near national snapshot of the volumes and prices – while the growers are essentially flying blind. They don’t know if the price they are being presented with is the lowest, a weighted average, or simply made up.

At this point, most consider that they have almost no option but to sell at the price that is being offered.

At this point, growers are highly exposed and vulnerable.

This needs to change.

We need to make the public aware of this issue. We need the government to prioritise the horticulture sector, based on food security and perishability.

In addition, we need to lobby the government to give increased powers to the regulator. The Australian Competition and Consumer Commission (ACCC) needs to have meaningful and intimidating powers and fines, as well as regular and easy access to the retailers’ data to monitor the weekly margins of individual products.

For the first time, the entire horticulture sector – 23 separate industries – has come together to prioritise this issue. We are working closely together to raise public awareness and lobby the government.

 

This article was first published in the Summer 2023 edition of AFG.

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