Supermarkets are changing supply chains: what this means for farmers

According to industry representatives and experts, retail giants Coles and Woolworths are centralising their supply chains in order to reduce costs. Specifically, they procure produce through packing facilities and intermediaries representing grower groups rather than directly from farmers. As noted by New South Wales Farmers Association Chief Economist Samuel Miller, if supermarkets consolidate suppliers or delist certain products, it impacts not only the middleman, but dozens of other producers as well.

Coles stated that it still sources goods directly from a number of Australian producers and that aggregators play an important role in the market. Coles representatives also emphasised that they have invested in upgrading and consolidating their distribution network. The network currently operates 18 distribution centres across the country (compared to 23 in 2019). Meanwhile, Woolworths operates 25 distribution centres and has been adding new facilities since 2017, including regional hubs to strengthen food security in disaster-prone areas.

Gary Mortimer, Professor of Retail Marketing at Queensland University of Technology, pointed to centralization in the meat sector, mentioning Woolworths' decision to cease selling Tasmanian beef starting early next year due to rising production and delivery costs. According to him, in-store food processing has declined over the past 10–15 years in favour of centralised processing.

Samuel Miller named the expansion of private label product ranges as another tool of centralization. Last year, Coles introduced 1,600 new private label products, while Woolworths introduced 445 new and 680 reformulated products over the past financial year. Coles maintains that its private label is unrelated to the centralization of supplies and is formed based on shopper preferences.

Former Australian Competition and Consumer Commission (ACCC) Chairman Graeme Samuel noted that about 18 months after the ACCC inquiry, no significant changes have occurred, and many suppliers are afraid to speak out openly about issues due to fear of retaliation. At the same time, approaching the ACCC requires significant expenses and drags on for a long time, during which small businesses can go bankrupt. In turn, Coles reminded of existing dispute resolution mechanisms, such as mediation under the mandatory Food and Grocery Code of Conduct.