Farmers asked to justify price increase requests while Coles conducts price review

If you’re finding it hard to afford high prices for fresh food right now, think about the farmers who supply it.

Supermarket suppliers are often bound by contracts with major grocers and for the most part do not have the leverage to negotiate price increases.

Supermarket giant Coles said it has received five times the usual number of price increase appeals from suppliers compared to the same period last year.

While the company has acknowledged that supplier costs have increased during the pandemic; and as energy, labor, shipping and logistics have spiked again this year due to the war in Ukraine, payment to farmers has remained mostly flat.

The company forecast an “unprecedented round of price increase requests in the next 12 months from the nation’s food and grocery manufacturers” and said it would review how it addressed those requests.

But in what is expected to add strain to the relationship, farmers are being asked to provide evidence and breakdowns of those higher costs to justify any potential increase.

In a statement, Coles said: “A primary focus of the review is how vendors will demonstrate to Coles the size and scope of their own cost increases.”

Coles and Woolworths delivery trucks parked together on Collins Street, Melbourne
Increases in shipping and logistics have added to the rising price of groceries.(ABC News: Michael Barnett)

the price is frozen

Jan Harwood of Margaret River Free Range Eggs is one of those struggling with rising production costs.

“Our packaging is up 30 percent in 12 months, [while] the hatchery just increased their prices by 20 percent and that’s really going to hurt us,” he said.

woman standing holding a chicken
Jan Harwood competes against the homemade brand of eggs in supermarkets.(ABC News: Georgia Hargreaves)

Ms Harwood said egg prices in the United States were up 50 per cent last year and she thinks Australia should do the same.

She was also concerned about the impact of the Woolworths supermarket chain’s “price freeze” campaign on suppliers.

Eggs, oatmeal and dairy products are all on the list of more than 200 private label products that have their prices “frozen.”

“They are already walking a very fine line in terms of earnings.”

Regulator to survey all providers

Independent Food and Grocery Code reviewer Chris Leptos said he was keeping a close eye on major supermarkets.

Chris Leptos, file image
Chris Leptos has warned supermarkets about the need to improve.(Supplied: Chris Leptos)

“I plan to survey 100 percent of Aldi, Coles, Metcash and Woolworths suppliers in September, and I expect to see more positive supplier feedback than I received last year,” Leptos said.

In their latest survey, 16 per cent of respondents said their wholesaler or retailer had acted unreasonably at times, and 30 per cent said they did not complain about their contracts for fear of retaliation from supermarkets.

Mr Leptos met with major supermarkets in May to explain that the Code’s complaints process was not fit for purpose and that a “less formal and more streamlined complaints process” was needed.

Woolworths has appointed labor lawyer Helen McKenzie as an arbitrator to police its dealings with suppliers, while Coles has appointed former Victorian Prime Minister Jeff Kennett to do the same.

Mr. Leptos said that he would meet with the arbitrators in August to discuss further improvements to the Code.

Aware , updated

Leave a Comment