Fruit sold below growing costs due to "predatory pricing" of supermarkets

In a submission to a Senate inquiry on supermarket pricing and market power, Fruit Growers Victoria chair Mitchell McNab said it was an "unsustainable situation" for growers struggling to make a living and the general public relying on fruit producers maintaining production.

"The two major retailers, Coles and Woolworths, are able to set the price for horticultural produce due to their dominant 65 per cent market share," he said.

"Growers must accept prices offered because their produce is perishable, they require cash flow to meet production costs, or because they are afraid of retribution.

"The price is set by the lowest price available. We are concerned that abuse of market power and unfair buying terms is making fruit growing uneconomic, with our members reporting being forced to sell fruit below the cost of production."

He added that the 2010 Horticulture Code of Conduct and Food and Grocery Code of Conduct has had little, if any, material effect on the "predatory pricing behaviour of the major supermarkets."

Over 70 per cent of Australian-grown apples and pears are sold in major supermarkets.

The experience of apple, pear and stone fruit growers and packing sheds in Victoria is a snapshot of the power imbalance between powerful supermarkets and agriculture industries comprised mainly of small to medium-sized operations across the country.

Buying prices for apples, pears and stone fruit is determined weekly via an online tender process between retailers and suppliers and "the lowest price becomes the price."

It also means prices can often fluctuate dramatically on a week-to-week basis, making planning and budget decisions difficult for growers, according to Mr McNab.

A lack of price transparency, where supermarkets hold the pricing information, further dwindles any bargaining power producers may hold.

The FGV submission recommended several policy reform measures, including strengthening of current regulatory arrangements covering unfair contract terms and enabling collective bargaining to counterbalance power imbalances.

It also suggested the introduction of mandatory price reporting from the two major supermarkets to the Australian Competition and Consumer Commission that detailed all supply chain costs and margins.

"While this represents an imposition on the supermarkets, their social licence has been compromised to the extent this is now a necessary measure," it said.

Mr McNab also called for the regulator to dig deeper into where margins are being taken through the supply chain to help determine when price spikes were genuinely attributable to input cost increases or were genuine price gouging.

The latter point taps into a strong theme within a report by former competition regulator Allan Fels' who made the brutally frank assessment that Australia has "weak and ineffective competition in too many markets".

The report, released last week, also claimed that "sellers inflation" has occurred amid increasing corporate concentration and corporate profits.

Professor Fels identified eight "exploitative business pricing practices" used by "oligopolies" to squeeze consumers that could not be solely attributed to variables like inflation or supply chain cost pressures.

THE PR WAR

But it is not only the day-to-day battle against supermarkets that growers say they are up against, with the public relations war also woefully lop-sided courtesy of the major corporations' cashed-up public relations and marketing divisions.

Queensland Fruit & Vegetable Growers has warned Australians to bunker down against regular "spin specials on the truth" concerning rising food prices from major supermarkets during the the Senate inquiry.

QFVG chief executive Rachel Chambers claimed Coles had already started by telling "half the story" in its inquiry submission in claiming that requests from suppliers and farmers were a key driver of supermarket price increases.

In its inquiry submission, Coles said it had received 3804 requests from suppliers for cost increases last financial year.

"What they left out, is how many of these suppliers were granted these requests," Ms Chambers said.

"A glaring omission given data released last year from the Independent Reviewer of the Food and Grocery Code found 100 per cent of suppliers did not feel their issues were satisfactorily addressed by the retail/wholesale buying teams."

She also said that claims made by Woolworths in its submission that food inflation had been driven by cost increases from supplier partners, along with cyclical impacts in fresh food markets, "infuriate growers."

"As we know many of our growers are still receiving similar prices as they were a decade or more ago," she said.

Meanwhile, National Farmers Federation chair Jolyon Burnett said it was "disingenuous" that supermarkets were using deflection tactics in inquiry submissions "established to review their own pricing practices."

"It is disappointing, but perhaps predictable, that their first attempt at a defence fails to shine any light on their pricing practices and attempts to blame the victims," he said.

"It is telling that their only evidence to support their claim that it's supplier costs that have driven up prices and not their profiteering is the number of requests made by suppliers for price increases, not the increase prices they've actually paid to suppliers."

He added that supermarkets did not need suppliers to open their books to know the impact on production and prices of "well-documented and discussed" recent increases in inputs, such as fertiliser, chemicals, labour and transport.

"They can field a thousand requests and not pay a cent more and that is the experience of fresh produce growers across the country," he said.