Coles justifies pricing pressures on suppliers but backs off animal campaign

Posted by AFN Staff Writers on 5th June 2013

Australian customers, communities and the economy have benefited from supermarket group Coles’ “investment in lower prices”, according to Coles Managing Director, Ian McLeod.

At the same time, Coles has been forced by Australian farming groups to reassess its endorsement for an animal rights group opposed to intensive farming.

MD describes wider benefits of lower price campaign

Speaking at the American Chamber of Commerce in Sydney on 4 June 2013, Managing Director Mr McLeod said that the Coles supermarket group’s continued push towards lower prices over the last five years has reduced the cost of shopping for its customers, increased competition, driven more sales for Australian farmers and food manufacturers, created new and “more secure” jobs, and put “millions of dollars back into local communities”.

Mr McLeod used the speech to defend the supermarket group’s low prices against “attacks” from politicians, as well as “right wing commentators and left wing unions”. He highlighted claims that Coles makes profits by “bullying” its suppliers, as well as claims that low prices would “bring about the demise of the corner shop”, that they negatively affect farmers and truck drivers. Mr McLeod said that each of these claims was “dead wrong”.

Instead, Mr McLeod said, low prices at Coles supermarkets had:

Saved Australian families an average of $450 on their grocery bill
Secured jobs for 102,500 Coles team members and supported a further 120,000 throughout the broader economy
Grown Australian food sales by $4 billion, including selling an extra 200,000 tonnes of Australian grown fruit and vegetables
Boosted public sector spending on education, health and welfare by quadrupling the amount of corporate tax paid by Coles to $324 million in 2012
Put nearly $30 million back into local communities in 2013 through support for charities such as Redkite, SecondBite food rescue, Foodbank and initiatives like Coles Sports for Schools

Long-term supply commitment

Mr McLeod also pointed to Coles’ recent long-term supply deals with dairy co-operatives Murray Goulburn and Norco as evidence that the supermarket group was dedicated to Australian farmers.

Code for supermarkets nearing finalization

Mr McLeod confirmed that the supermarket groups are close to finalizing a deal with the Australian Food and Grocery Council (AFGC) – which represents most of the major suppliers to supermarkets, on the wording of – an industry code for supply contracts and negotiations between suppliers and supermarkets.

According to The Australian newspaper, Mr McLeod said that there were not any “sticking points” that could not be resolved to finalise the voluntary code.

Coles faces heat over support of animal rights group

Meanwhile, Coles and animal rights group Animals Australia, have faced pressure from Australian farmers’ groups over Coles proposed agreement to sell shopping bags that were part of the animal rights group’s latest campaign.

Rather than Coles being seen to be unilaterally withdrawing from the campaign on animal rights ethics, it was Animals Australia that announced that it has asked Coles to withdraw the ‘Make it Possible’ shopper bags from its stores. Pressures from the National Farmers’ Federation created concerns of a broader backlash within the general community, and not just farmers, against Coles and the animal rights activist group.

Coles is owned by Westfarmers Ltd, which is an ASX-listed company that has a longstanding historical connection as a supplier for farmers and its origins were as a farmer co-operative in Western Australia before being transformed into a retail and industrial conglomerate.