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Media and government shining a light on supermarket behaviours – Advocacy Report Autumn 2024

Industry Advocacy

Jeremy Griffith, APAL Head of Government Relations and Advocacy, shared this update to industry in the Autumn 2024 edition of AFG.

Finally, the federal government and media are turning the spotlight onto the behaviours of the major supermarkets.  

The recent Four Corners program and the on-going Senate inquiry into the price setting practices and market power of the majors is finally focusing attention on how Coles and Woolworths treat both the consumer and grower.  

What is most telling is that, when the media started to scratch the surface, the expectation was that consumer price-gouging would lead the way. Without doubt, however, it is the stories of abuse of power that growers have provided that have taken centre stage.  

As many people in the industry are aware, these behaviours have been going on for decades, but as they have been behind closed doors (with growers fearing commercial retribution for speaking out), they have not been in public view. 

Growers’ stories over the last month have been all deeply revealing: farmers not receiving a price increase for 15 years; a third of all vegetable growers wanting to walk away; and the removal of 15 percent of Australia’s pear orchards to name a few.  

Constant themes are being replayed to government and the media including:  

  • the targeting of growers on the basis that their product is perishable 
  • opaque surcharges and unclear payment terms 
  • compressed buying cycles to limit grower’s options 
  • almost non-existent upfront contracts outlining price or volume 
  • the allocation of almost all risk to the grower 
  • zero grower insights into how market price is determined 
  • the overhang of commercial retribution  
  • the inability to pass on legitimate cost increases. 

Many of these practices are unheard of in a competitive market but seem to be accepted norms and practices by the supermarkets when dealing with the horticulture sector. 

Another strong message is that this is the sector that produces 98 per cent of Australia’s fresh fruit and vegetables and underpins our food security, yet it is being held to ransom by two large corporate entities. 

The challenge with duopolies is that, firstly, they are never good for an economy: they slow economic growth, reduce employment, consumers will pay more and suppliers (farmers) will get paid less. And secondly, they are almost impossible to regulate.  

In the ideal world, the government would have stopped them from forming a duopoly in the first place. Unfortunately, government turned a blind eye to this and over the last 30 years has allowed them to reach a position where together they dominate 65 per cent of the market. 

From the economy’s perspective, the best thing is to break them up.  

This is not as draconian as it sounds. The supermarkets regularly resize themselves all the time. Wesfarmers (Bunnings, Kmart, Target etc) broke off Coles in 2019, and Woolworths broke off Dan Murphy’s and its pub group ALH in 2021 to form the Endeavour Group. Both are now separately listed companies on the ASX. Nobody blinked.  

Regardless, the government should never give up its powers to break up a duopoly. This power should always be on the table, in plain sight, and very easy to use. It can act as a very powerful deterrent to poor behaviour. 

In addition, it needs to develop a stand-alone policy to protect the horticulture sector, which is the most exposed to the supermarkets due the perishable nature of its product and vital in the role it plays in protecting our food security. The regulator needs to have dramatically increased powers that intimidate – fines, penalties, including personal liability, access to data etc. 

It must be crystal clear that if you want to run a duopoly in this country expect that everything you do will be watched and you will be held accountable. 

 

This article was first published in the Autumn 2024 edition of AFG.

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