AUS: Suppliers offended at Woolworths “blame shifting” over prices

The Australian Food and Grocery Council last night (23 July) expressed their disappointment with Australia's largest supermarket chain over what they perceive to be an unfair shifting of blame to manufacturers for rising food prices.

Australia's leading representative of food and grocery manufacturers was upset by comments made by Woolworths Ltd chief executive Michael Luscombe on radio yesterday morning.

Luscombe told ABC Radio National that questions about food inflation were best answered by multinationals which he claimed "dominate" the food supply in Australia.

"We've done our very best by reducing our retail prices strategically and introducing private label which is a far better offer for the customer in terms of value," he argued. "But I think that question's best directed to multinationals that dominate our food supply in this country.

"Clearly we don't have an opportunity to look at their profit and loss statements and see what margins they're making on the business. What you're seeing in retail in generally is a reflection of the cost increases that are being passed onto retailers."

AFGC chief executive Kate Carnell expressed dismay with Luscombe's comments, saying that it was a blatant attempt to divert blame for food inflation toward the food and grocery processing sector.

"It's a bit rich for Woolworths to be targeting Australia's food manufacturers while the supermarket giant generated bumper sales growth of 7.5 per cent for the year to June 30," Carnell said.

"It's also important to remember that Woolworths is one the most profitable supermarkets in the world - Mr Luscombe's comments just don't stack up."

Carnell said there were a number of reasons for grocery price increases in Australia, including cost inflation caused by drought, global commodity price increases and fluctuations in the Australian dollar.

"Competition between food and grocery manufacturers is at least as intense as other major international markets, however the same may not be said for the supermarkets sector in Australia," Carnell said.

The comments by Luscombe indicate underlying tensions between the chain and manufacturers, symbolic of the strained relationships between manufacturers and supermarket chains around the world since the onset of the financial crisis.

Retailers have been keen to push their private-label goods - attempting to capitalise on weakened economic conditions. As such, they have been acting more like a competitor than the customer they have traditionally been in the supply chain.

One of the most publicised confrontations that has occurred involved multinational giant Unilever and Belgian supermarket chain Delhaize - whose disagreement led to a brief stripping of Unilever products from the shelves of the retailer.

Ironically, the blame debate has reignited in a week when ABS data actually showed food prices had fallen by just under one per cent in the June quarter.