Are Major Grocery Chains Dropping Local Manufacturers?

Are Major Grocery Chains Dropping Local Manufacturers?
April 13, 2013

Two different major food grocery chains have been cited by food manufacturers for blocking out Australian local producers. 

According to several companies that manufacture and provide food locally in Australia and New Zealand say that they are being forced off the supermarket shelves by both Coles and Woolworths.

According to these companies, the grocery chains are asking them to lower their prices dramatically in order to compete with private label products. Essentially, the manufacturers are being asked to drop prices to the point where they can no longer make a profit. If they do not, then the supermarkets threaten to drop them completely.

The vast majority of the food manufacturers in question are not capable of exporting their products to make any type of profit either. Currently, the Australian dollar is very strong when compared to the money in other countries. Because of this, any company that chose to export their products could face severe loss.

Because of this, small local food manufacturers are feeling pushed out of business since they can't afford to export their products and they can't afford to drop their prices enough to stay in with the two major grocery chains. Because Coles and Woolworths control such a large majority of the grocery industry in Australia, this is a definite cause of concern.

Currently, neither one of the supermarkets has been prosecuted. However, that could change shortly. The Australian Competition and Consumer Commission (ACCC) is currently considering all of the evidence and may eventually bring a case against both Coles and Woolworths. According to the ACCC, if charges are brought up, they will be for both unconscionable conduct and misuse of market power.

A good example of this issue can recently be seen in what has been called the "milk war". Several grocery chains offer their own private label milk for prices so much lower than other providers that it is almost impossible to compete. This severely affected dairy farmers as well as the distributors of the milk specifically.

Whether or not the two grocery chains are prosecuted is less of a concern for the local food manufacturers. Instead, these small companies may continue to lose business until they can no longer stay in operation. Because most consumers in Australia put such great emphasis on buying non-imported items, this is an especial cause of concern. If change is to come, it must come quickly to save the small food manufacturers local to Australia.