A host of food industry and farmer organisations representing $220 billion in sales has met with officials from the Australian Competition and Consumer Commission to air concerns that soaring inflation and the market clout of Coles and Woolworths could result in an increasing corporatisation of the food supply chain.
The Food Industry Alliance has been established to try to convince policymakers and regulators that more needs to be done to ensure that smaller, independent operators, including farmers, local butchers and greengrocers, food distributors and independent supermarket retailers, have a level playing field as cost inputs jump.
Key players held a video meeting on Tuesday with ACCC chairwoman Gina Cass-Gottlieb and her deputy Mick Keogh at a time when inflationary pressures are moving right through the supply chain.
Farmers are grappling with big jumps in fertiliser and fuel costs and labour shortages, while food producers are trying to absorb some of the heavy increases in packaging costs, raw material inputs and energy costs.
The $12 iceberg lettuce has become a flashpoint symbol in Australia for soaring cost-of-living increases among households.
Richard Forbes, chief executive of one of the member groups, Independent Food Distributors Australia, said the sheer size of Coles and Woolworths meant they were in a stronger position to push those rising costs back down the supply chain to other players in the chain.
Better protection and tough competition laws would ensure a robust independent sector at a time when more consumers want to shop locally, but are also conscious of household budgets being squeezed.
“What we can’t have in this country is a corporatised supply chain,” Mr Forbes said.
“There is a market out there that does not involve the two major retailers.”
Mr Forbes said local store owners and business operators had strong community links, which often enabled them to better ensure that food products were available.
The FIA also includes the National Farmers Federation, Australian Meat Industry Council, Master Grocers Australia and the Australian Association of Convenience Stores.
It represents about 156,000 businesses, many of which are family owned, which produce about $220 billion in sales and have a workforce of about one million people.
Mr Forbes said the cost of ingredients had climbed by about 25 per cent in the past few months, while the hefty rises in international shipping costs showed how crucial it is for Australia’s home-grown food industry to be in the best possible shape.
The food service industry supplies hospitals, aged care homes, childcare centres, cafes and restaurants.
Ash Salardini, the acting chief executive of the National Farmers Federation, said the pursuit of a more level playing field at the supermarket end of the chain was needed. He said it was difficult for farmers to pass through higher costs.
“This is not a Woolworths and Coles bashing exercise,” he said. But it is crucial that smaller producers are protected.
He pointed to the duopoly which exists in chicken processing in Australia, where ASX-listed Inghams and Baiada Poultry control about 70 per cent of the market. “It’s very hard to pass on those costs,” he said.
Master Grocers Australia chief executive Jos de Bruin said there were “anomalies” in the supply chain, such as an independent supermarket in a remote town missing out on supplies of particular groceries because suppliers had Woolworths and Coles as the top priorities.
He said the clout of the big two chains meant they could cross-subsidise in their businesses to absorb increases in freight and other costs, whereas small operators didn’t have that option.
“We’ve seen the waterbed effect in a lot of areas,” he said.
Woolworths chief executive Brad Banducci announced this month the group was freezing prices on everyday essentials, such as flour, sugar, vinegar, laundry powder and nappies, until the end of the year.
The ACCC last year gave the all-clear for Woolworths to take control of PFD Food Services despite concerns about the impact on competition.
Due to the dominance of Woolworths and Coles, food service is an important alternative channel for food manufacturers and distributors, and margins for suppliers tend to be higher than those in the supermarket channel.
Extracted from AFR