The ADF called for a mandatory Code of Conduct for supermarkets to be enforced by an ombudsman as part of its submission to the recent Senate inquiry into supermarket pricing.

It reiterated its claim this month in the wake of the Government’s response to the Senate inquiry.

Now, the AFGC says the latest discounting of fresh produce by Coles is another reason why the Federal Government should appoint a supermarket ombudsman to enforce a Supermarket Fair Trading Code of Conduct.

Coles has announced it will discount a range of fruit and vegetable items by as much of 50%.

AFGC chief executive Kate Carnell said it was concerning the latest fresh produce price cuts were not being driven by supply chain competition or lower costs of production.
“If these current ‘price wars’ continue, the profitability of Australia’s food manufacturing sector, as well as farmers, will be eroded and the result could be a significant loss of both processors and producers,” Carnell said.
“We’ve already seen the impacts of price discounting on food and grocery manufacturing – this latest move will obviously impact small producers and spells danger for manufacturing, jobs and regional communities.”
Carnell said this once again highlights the need for a regulated Supermarket Fair Trading Code of Conduct enforced by a supermarket ombudsman to create a more level playing field for primary producers and manufacturers in their dealing with Coles and Woolworths.
This measure has been outlined in AFGC’s 2012-13 Federal Budget submission.
“Australia and New Zealand has the highest levels of supermarket concentration in the world, delivering significant market power to major supermarkets and making it increasingly difficult for suppliers to negotiate reasonable trading terms and compete with the growing levels of private label products.”

Recent Australian Bureau of Statistics figures also reveal what the ADF has long claimed, that discounted products like milk are being used as a loss leader to attract shoppers.

The latest consumer price index figures show prices for items like tea, coffee, breakfast cereals and biscuits rose in the three months to December 31.

Consumer watchdog Choice said cheap milk and fruit and vegetables was a marketing ploy to get customers in the door.

“They are just loss leaders,” a Choice spokesman said.

“Shoppers are naturally attracted to those prices, but once you are in the store you just don’t go for that $1 milk or the cheap bread. You throw other products into your trolley.”

Carnell said producers were frustrated that lack of competition made it hard to negotiate reasonable trading terms. 

“A very large chunk of the discounted prices are being paid for by pushing price back into the supply chain to the manufacturers and the farmers,” she said.