Farmers Worried About Losing Market Access to Supermarket Giants

Fruit and vegetable providers depend on supermarkets but lack negotiating power and face significant costs to supply the industry giants, an inquiry has heard.

Producers are highly reliant on Coles, Woolworths, and Aldi for vegetable sales, the industry’s peak body told the Australian Competition and Consumer Commission probe on Nov. 8.

About 98 percent of the vegetables grown in Australia are consumed locally, AUSVEG public affairs manager Lucy Gregg said.

Fruit Growers Victoria’s Michael Crisera said there were similarly low export rates for apples and pears, although stonefruit, citrus, and grapes had some overseas avenues.

But orchardist Peter Hall said fragile export markets lacked the certainty of a supply arrangement with national supermarkets, which providers were reluctant to endanger.

It was rare for a new entrant to supply supermarkets and equally rare for an existing one to lose their position, he said.

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Supermarkets assumed responsibility for produce when delivered to distribution centres, but there were costs involved for growers and suppliers before that stage.

One is packaging, which has generated disquiet, Hall said.

Supermarkets are demanding more environmentally friendly packaging—following the phase-out of single-use plastics—which requires significant investment in machinery.

Different supermarkets require different crates for loose fruit and want their own branding on packaged fruit, which means rejected produce has to be repackaged to sell elsewhere.

“It’s a very expensive operation,” Hall said.

Gregg said rejected vegetables were donated to food charities or dumped.

“It’s not feasible for such a low-margin product to send it back to repack,” she said.

Growers were “price takers” rather than setters, the inquiry heard, while big retailers were in a “fortunate” position.

“They’re in a duopoly … they can dictate the pricing,” Hall said.

Suppliers sometimes faced consequences for not agreeing to less favorable terms with retailers.

“Not accepting some supermarkets’ offers may lead to the supplier being placed on what they colloquially refer to as a ‘holiday’,” the commission said in its interim report in August.

Gregg said “holidays” for suppliers were not exactly prevalent.

“But it occurs enough for them to be concerned, and for it to have commercial ramifications,” she said.

Suppliers would not raise concerns with supermarkets, fearing it would jeopardize their commercial relationship, the commission reported.

Crisera told the inquiry Woolworths did a better job planning promotions.

“It’s not always a clear plan … Coles have a fear of that intel getting out,” he said.

Supermarkets were also protective of scanned data that provides insight into sales, which was rarely shared with suppliers who could use it to plan crops or negotiate agreements, the inquiry was told.

Representatives from Woolworths, Coles, Aldi, and Metcash—which licenses the IGA brand and others—will appear at the inquiry later in November.

The commission’s final report is due in February.