Blog: Dean BestColes chief hits out at suppliers

Dean Best | 21 February 2012

Domestic and international manufacturers operating in Australia have spent months complaining about the tough trading conditions in the country and there have even been calls for a watchdog to oversee the sector. Coles, the country's second-largest grocer, has hit back.

Richard Goyder, the managing director of Wesfarmers, the Australian conglomerate that owns Coles, has said calls for a watchdog to be set up are "a joke".

"The call from the Australian Food and Grocery Council for an ombudsman is frankly a joke," Goyder said. "I've never seen any business or industry ombudsman that would do anything but detract value from the sector and so I think it's a joke, and it's from people who haven't invested enough in their own brands and haven't invested enough in their own production capabilities to provide customers with what they want."

Goyder was speaking after Coles reported a 14% jump in half-year earnings. Revenue was up 7.3% and comparable-store sales increased 4.4%. The results showed growth was outpacing arch rival Woolworths, which reports its numbers next month.

The increased sales and profits also came despite falling prices. Coles said prices fell 2.4% in part due to its "commitment to lowering food prices for Australians". That strategy has, through price cuts and investment in private label, hit some manufacturers hard.

On Thursday, Australian bakery and dairy group Goodman Fielder pointed to "heavy discounting and home-brand resurgence" as factors that led to falling profits over the first six months of its financial year.

Last week, local dairy group Lion, which has seen profits fall in recent months, warned it would continue to face "significant" pressure on its margins.

And Heinz, which has been vocal in its warning of how tough trading conditions are in Australia, said on Friday it had seen "sequential improvement" in the market but still admitted its volumes had fallen in the three months to 25 January.

In an interview with just-food in September, Kate Carnell, the chief executive of the Australian Food and Grocery Council, said competition between Woolworths and Coles had "escalated" and the retailers had become "much more aggressive" with suppliers. The country's competition authorities had "done nothing" to protect suppliers and had "allowed and supported Coles and Woolworths getting bigger".

Carnell leaves her post in March. Her replacement at the AFGC, which did not respond to a request for comment for this article, faces what has become a thorny issue.


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