If you are finding it tough paying high prices for fresh food right now, spare a thought for the farmers supplying it.
- Coles reports a spike in supplier demand for higher payment
- The grocery regulator warns supermarkets should be more flexible with supplier contracts
- Suppliers are hurting as profit margins are eroded
Suppliers’ costs went up during the pandemic and energy, labor, shipping and logistics have ballooned again this year due to the war in Ukraine, but suppliers need to negotiate with supermarkets before the price they receive for their products can change.
Supermarket giant Coles said it had received five times the usual number of pricing increase appeals from suppliers compared to the same time last year.
The company has forecast an “unprecedented round of pricing increase appeals over the next 12 months from the nation’s food and grocery manufacturers” and said it would review the way it dealt with those requests.
In a statement, Coles said, “A major focus of the review is how suppliers will prove to Coles the size and scope of their own cost increases.”
Coles supporting flooded farmers
The recent floods have had a dramatic effect on the supply of fresh food and farmers are reeling financially from the wet and cold conditions.
In a statement Coles said it had been helping those farmers by increasing the amount it paid for produce.
“There has been a sharp decline in the amount of fresh produce available, with payments for some of the harder-hit categories of fresh produce up by tens of millions.”
One Lismore grower who has supplied vegetables to Coles for more than 35 years was badly hit by the flood.
Coles said it issued this supplier with a three-year supply agreement “to demonstrate our confidence in the business and support it through this extremely challenging period”.
Jan Harwood from Margaret River Free Range Eggs is one of those struggling with rising production costs.
“Our packaging has gone up 30 per cent in 12 months, [while] the hatchery has just put up their prices by 20 per cent and that’s really going to hurt us, “she said.
Ms Harwood said egg prices in the United States went up 50 per cent last year and she thinks Australia should follow suit.
She was also worried about the impact of supermarket chain Woolworths’ “price freeze” campaign on suppliers.
Eggs, oats and dairy products are all on the list of more than 200 home-brand goods that have had their prices “frozen”.
“They’re already walking a very thin line in terms of profits.”
Regulator to survey every supplier
Independent reviewer of the Food and Grocery Code, Chris Leptos, said he was watching the major supermarkets closely.
“I plan to survey 100 per cent of the suppliers to Aldi, Coles, Metcash and Woolworths in September, and I expect to see more positive feedback from the suppliers than I received last year,” Mr Leptos said.
In his last survey, 16 per cent of respondents claimed their wholesaler or retailer had acted unreasonably at times, and 30 per cent said they did not complain about their contracts for fear of reprisal from the supermarkets.
Mr Leptos met with the major supermarkets in May to explain that the complaints process in the code was not fit for purpose and a “less formal and more streamlined complaints process” was necessary.
Woolworths has appointed employment lawyer Helen McKenzie as an arbitrator to watch over their dealings with suppliers, while Coles has appointed former Victorian premier Jeff Kennett to do the same.
In a letter to Mr Leptos, Coles said it was committed to an “open relationship with suppliers and proposes to establish a direct line of communication for suppliers” to raise issues directly with senior Coles staff.
The company said it wanted to develop a culture where issues could be raised directly at a senior level.
Mr Leptos said he would meet with the arbitrators in August to discuss further improvements to the code.
Editor’s note 22/6/2022: This story has been amended to better reflect the use of fixed-price contracts and to include the support Coles is giving flood-affected farmers.
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