Coles asks suppliers to cut prices to pay for discounts

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.

Also read: Supermarkets, airlines and power companies charging ‘exploitative’ prices

Written by Brad Lockyer

Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.

12 Comments

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    • Care to share this insight you have? Do you have the figures to back up this claim?

      How is a company in Australia making money a “despicable act”? Would you like a system where the prices are set by the government, where companies cannot make a profit? Do you really want that much control from the government?

      • You’ve obviously never been a farmer who’s been screwed over by the likes of Coles and Woolies. Paying farmers below costs of production and charging fives times that price so they lodge 1.1 and 1.6 billion dollars profit. Businesses must make profits to survive, but screwing over farmers and customers, equal to the government screwing over tax payer to feed their egoism and extravagant non fulfilled promises

  1. Nothing new here. Supermarkets have always expected suppliers to cut prices so they can have a special. Often forcing farmers to supply produce below cost price.

  2. There are so many things that I used to buy in Coles but now don’t because the prices have risen way more than inflation. For instance I used to buy Coles own brand mixed grain bread. It’s nothing fancy but used to cost $2.39 less than 2 years ago. We are told that bread has risen 8% but Coles now charges $3.49. By my reckoning that is a rise of more than 40%. How can that be justified?

    • Actually , it is 46% I’m sure Coles will drop what they pay their suppliers of market produce.. Perish the thought that they should losea portion of profit. They will drop their shelf prices, and expect thee producer to drop theirs, while they producers are scraping to make a living with the pricess they have to accept from Coles, and I’mm sure Woolworths under contract.

  3. Hi Folks, well the current practice from Coles mainly has been going on since the 1980’s.
    First step they use is the marketing , then if the supplier doesn’t come on board then they threaten them with deletion of products off the shelf, if this isn’t convincing enough, then they delete ONLY the brands and SKU’s which are not the market leaders, plus a sweetener of high co operative charges on the companies promotional programme.
    If the supplier wishes to have products re-ranged at a later date, they then charge new line fee’s plus request more co operative dollars for those lines, plus other charges.

  4. Why are people so quick to put 100% of the blame for price increases on the supermarkets? Why is no one blaming this Government’s policies for the rise in business costs (such as wage increases, the IR laws forcing businesses to make casual workers permanent with additional benefits on top of those already paid for in their hourly rate, climate policy leading to ever-increasing power charges, fuel price increases partly due to excise increases)? The basic costs of doing business have risen sharply and that includes ALL businesses (from farmers, producers, transport and logistics, storage, and suppliers). You cannot have increased business costs and decreased retail costs, eventually, the stores and businesses will go bust. Contrary to popular belief, profit is not a dirty word, It is the perception of excessive profit that people object to but fail to suggest a profit level that would be acceptable.

    • Don’t forget that the profit they disclose is net profit after all costs have been accounted for. This is outright price gouging. Forget Coles and Woolies and shop somewhere else as I have done, when I compared prices.

  5. Usually the things price dropped are the junk stuff, soft drinks, lollies, chocolates etc and people fill their trolleys with less food and more junk. We don’t buy that stuff. We buy fresh fruit and vegetables, pantry items, we go to our local butcher, We also have chickens for eggs.
    Charities are hit hard with people who need to be taught how to shop and cook interesting but simple meals.

    • I agree with you Helen. Even in their weekly catalogues most of the “specials” are literally junk food.
      I buy Tetley Decaf Tea bags when it is on special, but have never seen the full strength Tetley Tea bags on special. They “special” the lesser bought product.

  6. Any business has to be profitable to survive and grow. But when the profits are excessively high there are grounds for questions to be raised and answers to be provided by these companies that have a monopoly in the Australian market.
    Coles Sales Revenue Growth went up by 5.9% . Their Qtr 4 sales growth went up by 8% in the Supermarket area and 2.9% in liquor. Dividends went up by 4.8%. The full year profit of Coles was $1.1 billion.
    I had read that the CEO of Coles appointed in May 2023 gets a compensation of $3.3mill and owns 0.026% company shares worth 5.49mill. Top Management compensation and shareholder dividends are based on the profits of the company. The larger the profits the larger the rewards. Restructuring is not uncommon in Coles. In 2019 there was a Head Office shake up with 450 roles made redundant. Fruits vegetable and other healthy grocery items have risen from around 20% to even 100%. Customers pay more for less. For example, a 1 kg tub of fat free yoghurt costing around $5.00 on sale is now sold in a 905gms tubs for approx $6.30 on sale. The list can go on and on.
    Farmers have been complaining that they have been arm twisted to continue accepting prices that they were getting 15 yrs back. Many of them are being forced to contemplate getting out of the farming business.
    Coles this year has asked its suppliers to further discount their supplies for the Down Down campaign.
    It’s clear that there are no grounds for Coles or for that matter even Woolworths to squeeze both customers and farmers to ensure huge increases to top management compensation and shareholder dividend. The Australian government must end this monopoly if they want these monopolistic prices to come down.

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