Give fresh produce suppliers greater transparency of supply forecasts, says ACCC

The final report for the consumer watchdog’s supermarkets inquiry was released last week, and made 20 recommendations after finding that ALDI, Coles and Woolworths are some of the most profitable supermarket businesses among global peers and their average product margins have increased over the past five financial years.

The recommendations — which include clearer pricing practices, greater transparency for suppliers and reforms to planning and zoning laws — are designed to improve competition in the supermarket sector, make a difference for consumers and give suppliers fairer bargaining conditions.

It is the impact on suppliers that has had farmers and their lobby groups eagerly watching the outcome of the inquiry.

The ACCC said there was substantial information asymmetry between fresh produce suppliers and supermarket chains when they participate in weekly tendering process.

It is recommending that ALDI, Coles and Woolworths be required to provide fresh produce suppliers with greater transparency about the weekly tendering processes they use to negotiate price and volumes with suppliers.

The implementation of this recommendation would involve further consultation which should be undertaken by the ACCC.

“We are proposing to hold a consultation process with relevant stakeholders to develop reform recommendations for supermarket fresh produce weekly tendering arrangements,” ACCC deputy chair Mick Keogh said.

The ACCC is recommending ALDI, Coles and Woolworths should not be able to unilaterally reduce the price or volume agreed in purchase orders confirmed through their weekly tendering processes other than in the case of a force majeure event.

Further, supermarkets should be required to provide fresh produce suppliers with more detailed information about the basis for seasonal forecasts to allow suppliers greater ability to predict and forecast future demand.

“Improving transparency for demand forecasts will give suppliers greater certainty and greater ability to assess their risk exposure in the supply of fresh produce,” Mr Keogh said.

“We received detailed information in confidential submissions and roundtables with suppliers who placed significant trust in the ACCC to hear their views.

“Many suppliers fear retribution from raising concerns directly with the major supermarkets.

“We found that suppliers need more information and protections to be able to make more informed investment decisions.”

The ACCC recommends that major retailers be subject to mandatory market reporting obligations, so that suppliers of fresh produce can obtain a much better understanding of market conditions and will be better able to engage in informed supply negotiations with supermarkets.

To improve the current bargaining power imbalance and enhance protections for suppliers, the ACCC is also recommending that the Food and Grocery Code be amended to prohibit grocery retailers from being able to negotiate out of core protections in the code.

Federal Treasurer Jim Chalmers said the Federal Government accepted all 20 recommendations from the report, in principle, and was already taking substantial steps in most areas.

As part of the government’s initial response, Tuesday’s federal budget will include $2.9 million over three years to help educate suppliers on how to stand up to the supermarkets.

“Cracking down on the supermarkets is all about getting a fair go for families at the checkout and farmers at the farm gate,” Dr Chalmers said.

– with AAP.