Farmers and food manufacturers who supply Coles supermarket are being warned they need to keep getting more efficient.
Parent company Wesfarmers has recorded a strong third quarter profit of more than $8 billion, buoyed by a 6.6 per cent growth in food and liquor sales through Coles.
It’s the 15 straight quarter of growth in food and liquor sales, helped by lower prices (1.3 per cent price deflation) and the food discounting campaign.
Richard Goyder, of Wesfarmers, says Coles will continue to pursue direct relationships like the milk deal with Murray Goulburn, and he has a warning for food suppliers.
“There’ll be some instances where suppliers, who haven’t invested in their businesses and haven’t invested in new manufacturing processes and are carrying too much costs where they are, are still going to have to become more efficient.”
Senior retail analyst with Citigroup, Craig Woolford, says the fact that Coles and Woolworths are being investigated by the competition watchdog, for abuse of market power, is evidence of increasingly aggressive negotiations with suppliers.
He says suppliers have learnt some lessons.
“Some of the tactics that were used in the UK have been brought into the Australian market, tougher negotiating tactics.
“And the suppliers have gotten sharper and more prepared to deal with these tactics from the retailers.”