Supermarket giant Coles has asked some of its major suppliers to cut their prices ahead of a planned discounting push.
Australia’s supermarkets have been under fire from both politicians and the public over high grocery prices.
Responding to that pressure, Coles has asked its suppliers to prepare for price reduction requests in coming months so the supermarket can begin a discounting blitz.
The Australian is reporting that Coles is using improving inflation figures to justify price reduction requests. Coles cites the easing of key cost pressure points on the supply side such as freight, shipping and raw materials.
A spokesperson for Coles declined to comment on communications with its suppliers and price negotiations, but said the supermarket was focused on lowering prices for shoppers.
“We are working hard to keep grocery prices affordable for customers, particularly as they face escalating living costs with higher mortgages and rents, and increasing expenses like energy and fuel.
“Coles has kept price inflation in its supermarkets below the rate reported by the ABS for the past 16 quarters.”
Suppliers push back
Suppliers are likely to push back against the requests, saying labour and energy costs are still rising even if freight and shipping costs are going down.
Some suppliers report they have been contacted about a new ‘Down, Down’ campaign planned for 2024. These are currently designed as 13-week campaigns for autumn, winter and spring, and will see prices dropped across a number of food and grocery categories.
The planned discounts for consumers are between 5 and 20 per cent. But the price reductions are a tough ask for farmers and suppliers who are already operating close to their limits, especially as supermarkets are posting billion-dollar profits.
Just last month, farmers in Queensland claimed they were being paid ‘1978 prices’ for their produce while the supermarkets charged top dollar to the consumer. Queensland Premier Stephen Miles announced he had written to Coles, Woolworths, IGA and Aldi to set up a meeting to discuss “why the gap between what farmers get for their produce and what customers pay at the checkout is getting wider”.
Supermarkets under pressure
Grocery prices have been the face of the cost-of-living crisis gripping Australians. And the public has noticed. Last week, former head of the Australian Competition and Consumer Commission (ACCC), Alan Fels, released his report into the so-called practice of ‘price-gouging’ among Australian businesses.
Prof. Fels found that in the grocery sector, the Coles-Woolworths duopoly held disproportionate market power over consumers, supply chains and their workforce.
This, in turn, has led to escalating grocery prices (and profits).
The situation has now attracted the attention of the government with Prime Minister Anthony Albanese offering the ACCC “extra powers” to investigate and prosecute price gouging.
The federal government has also commissioned the ACCC to conduct an official inquiry into supermarket prices specifically. This inquiry will be collecting submissions from stakeholders over the course of the year, with the final report due in February 2025.
When announcing the inquiry, Treasurer Jim Chalmers said the goal was to protect both consumers and suppliers.
“We want a fair go for families and a fair go for farmers,” he said.
“Australians are under cost‑of‑living pressure, and we know that a lot of that pressure is piled on at the cash register.
“This is about making our supermarkets as competitive as they can be so Australians get the best prices possible.”
Do you think it’s fair for supermarkets to ask suppliers for discounts? Or should the supermarkets wear a drop in profits? Let us know in the comments section below.