HOME BRANDS – Coles and Woolworths control more than 80 per cent of the food and grocery retail market.

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FARMERS’ fears are growing that increased pressure from the dominant Coles and Woolworths supermarkets may force prices for farm produce dramatically down.

The mounting unrest follows  announcements by Woolworths that it will double the amount of shelf space devoted to its own discount home-brand range, effectively limiting retail opportunities for smaller food manufacturers and producers.

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Coles and Woolworths control more than 80 per cent of the food and grocery retail market.

“That’s a real concern to us,” National Farmers Federation president Jock Laurie said, “because when they change the brands they sell in favour of their discount home brands, it devalues the whole food market.”

Mr Laurie said lower-quality food imports were threatening to swamp home-grown produce.

However, a Senate inquiry on the discount milk price war has handed a win to the supermarkets, concluding that the war Coles began in January had been good for consumers and not so bad for farmers. Coles said it was pleased the benefits for consumers were now being recognised.

Some members of the Senate inquiry dissented from the report, with independent senator Nick Xenophon saying it proved consumer protection laws did not give farmers enough protection.

“If what Coles and Woolies have done to the dairy industry isn’t illegal, it should be,” he said.

Jan Davis, the chief executive of the Tasmanian Farmers and Graziers Association, said she was appalled by the Senate report findings and Woolworths’ move.

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“The whole intention of this Woolies’ strategy is to force domestic producers products off the shelves so it can substitute its own home-brand products and imported goods.”

Tamar Valley Dairy boss Jose Matteo said that much of the growth of his small family company had been possible because of contracts with the two supermarket giants for his niche product line. “Of course, it is always possible that Coles or Woolworths may decide to copy one of our products . . . but in the end it comes down to our relationship with them,” he said.

SUPERMARKET private-label product sales have soared by 85 per cent in the past five years and will next year account for 25 per cent of the $86 billion Australians spend on groceries, a report has found.

Consumers are making the biggest move to private-label or ‘own brand’ products in staple categories such as butter, milk, sugar and bread, where supermarket house brands now command up to 68 per cent of sales, the report by IbisWorld found.

Karen Dobie, IbisWorld general manager for Australia, said concerns about the state of the economy and low consumer confidence were driving private-label uptake, particularly among families with incomes below $44,000 a year.

Is there a shift to home brands??

“Households have been reining in spending, paying off debt and increasing savings. This, coupled with an increase in the range of private-label products available, has led many consumers to make the shift to home brands,” Ms Dobie said.

However, she warned that the short-term benefit of lower prices for consumers will come with a sting in its tail, as Australians eventually face less choice on supermarket shelves.

“All of this discounting means that someone is paying the cost of purchasing $1 litres of milk and $2 loaves of bread. More often than not, farmer and producer margins are being squeezed as supermarkets discount heavily to increase store traffic,” she said.

“In the long term, this trend will primarily benefit the supermarket giants and those producers that are contracted to manufacture private-label products.”

Woolworths and Wesfarmers-owned Coles, which have 40 per cent and 31 per cent of the national grocery market respectively, according to IbisWorld, have progressively expanded their private-label offerings since the arrival in Australia of Aldi, which has a private-label only model, in 2001.

Since 2007-08, private label products have grown from a 13.5 per cent share of total supermarket sales to 25.2 per cent in 2012-13. IbisWorld estimates that this will grow to 33 per cent, or $31.8bn, by 2017-18.

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In the UK, private label sales account for about 45 per cent of supermarket sales.

Private-label products now account for 40 per cent of low-income family grocery spending in Australia, but only 15 per cent of middle and higher-income family budgets.

Ms Dobie said supermarkets were targeting middle and higher-income groups because they represent the best growth opportunities – you and me!

“Major supermarkets are spending big bucks on activities aimed at blurring the lines between branded products and their own in-house fare. These retailers are introducing premium, organic and fair trade products – such as the Select range at Woolworths – to attract private-label buyers from all walks of life,” she said.

Resources – http://www.theaustralian.com.au/

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