McCain cutbacks linked to Coles private-label deal with Simplot

Posted by AFN Staff Writers on 13th June 2012

Vegetable processor McCain Australia is slashing the price it pays to its contract growers, and grower, let by the Victorian Farmer’s Federation are accusing McCain of bullying tactics.

McCain’s aggressive behaviour appears to be a consequence of a pricing competition triggered by a deal between Coles and McCain’s competitor Simplot. Coles recently pledged to source its entire private-label frozen vegetable products from local produce that would be packed by Simplot Australia factories.

Excluding supermarket private labels, the Australian frozen food processing market is shared predominantly between Simplot and McCain. The Simplot-Coles private-label deal is forcing McCain to cut costs for its contract-growers. In addition, the high Australian dollar has impacted on McCain exports.
From late May 2012, McCain has reportedly told at least seven of the 33 potato growers supplying its largest frozen chip factory, in Ballarat, that their contracts will not be renewed. A number of farmers in Victoria and Tasmania have had their annual contracts cut by up to 60%.

McCain, which sets the price for local businesses in Victoria buying chip potatoes, has also been offering lower prices to growers. Prices have reportedly dropped from $305 a tonne to $270. As Australian Food News reported last month, a motion has been tabled in Victorian Parliament to urge McCain’s to keep collective bargaining in place for potato growers.