Suppliers’ frustration over retail power is nothing new – and has perhaps been most vociferous in recent years in Australia, where the top two grocers account for over 70% of the market.
With local condiments firm Spring Gully Foods in administration, those concerns have been heard again and retailers, some blamed for the company’s plight, have moved quickly to offer contracts amid public support for the business.
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Spring Gully moved into voluntary administration earlier this month after losing sales and facing debts of A$10m.
The move led to claims Spring Gully’s plight was due to the shape of Australia’s grocery market, with over seven in ten Australian dollars being accounted for by Woolworths and Coles. Spring Gully chief executive Kevin Webb has refused to lay the blame at the door of the two retailers but, according to the adelaidenow.com.au website, said a tough retail environment and a spike in utility costs had hit the business. Its administrators, however, have pointed the finger at lost contracts with Woolworths, Coles and Aldi.
Coles insisted Spring Gully still supplied over 30 products to the retailer and said it had only switched one contract. However, this week, Coles announced Spring Gully will supply pickled onions under the retailer’s namesake own label after the grocer sped up talks it said it was already in with the firm.
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“Spring Gully did not previously provide us with pickled onions but do provide a number of similar products under their own brand. We were already talking to them when they entered administration but expedited the talks when we were made aware of the issue so as to help provide some additional confidence and certainty in the future of the business. Spring Gully have a great deal of experience producing a wide range of good quality foods and so were a natural choice for our pickled onion supply,” a spokesperson told just-food.
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By GlobalDataSpring Gully met with creditors this week to discuss its financial situation. The company reportedly has owes A$3m to creditors and has A$7m but Webb and his colleagues remain upbeat.
Spring Gully has seen a spike in sales since it moved into administration last week and the company is said to have received support from the public and the industry.
“The administrator wants us to continue trading and manufacturing, but we’ve got to maintain an improved level of sales,” chief executive Kevin Webb said on Tuesday, according to the adelaidenow.com.au website. Webb said there had also been interest in buying equity in the business. “The next three weeks for our family, our staff and our suppliers is the most important time in the company’s life and we hope it continues to trade well and grow stronger.”
Retailers Foodland and IGA had taken out full-page ads to highlight Spring Gully’s plight. The adelaidenow.com.au website added the company had had “significant offers of support” from Aldi and extra orders from Woolworths.
While the Spring Gully chief executive does not point the finger at Woolworths or Coles, there is no doubt Australia is a tough retail environment. The parent company of George Weston Foods, one of Australia’s largest food manufacturers, told just-food this week the combined market share of Woolworths and Coles meant trading with them was always going to be “robust”. Moreover, George Weston, the CEO of Associated British Foods, said Australia also suffered from an over-valued currency. “It’s difficult to be an Australia-based manufacturer,” he said. There are concerns in Australia about the future of its domestic supply base and has played a role in the public support for Spring Gully.
The country’s retail giants that have been blamed in some quarters for the woes of an Australian supplier have moved quickly. There is a business case: Spring Gully has been a long-standing supplier to retailers like Coles and it is in the grocer’s self interest to ensure companies like the pickled onion manufacturer do not go to the wall.
However, let’s face it, it does the likes of Coles no harm in the PR stakes either, with complaints over the make-up of Australia’s grocery sector ongoing and its two biggest players in the regulator’s spotlight.
