Are Australian supermarkets gouging?

Very interesting watch on the ABC (Four Corners). Not sure that the senior retailers covered themselves in glory…

https://www.youtube.com/watch?v=yoo6XVxpiU8 ?

The retailers have categorically denied price gouging, I don’t think anyone expected any other message from them – but is that necessarily right?

Let’s look at some of the alleged behaviours over the last 3 years:

1.????? Suppliers have seen material production cost increases – these have in part, or in whole, been passed on to the retailers. This is not a disputed fact and has contributed to inflation.

2.????? The retailers have aggressively pushed back (as is their right) on many of these increases. Were they seeking to retain a portion of the wholesale price increases themselves or protect shoppers from higher prices?

3.????? On acceptance of the price increase, in part, or in whole, it has been shared with us that the retailers have then increased the retail price by the entire proposed supplier increase (as is their right). They did not appear to reduce the scale of retail price increase if they were successful in pushing back on suppliers. Simply put – retail prices then progress ahead of wholesale prices increasing retailer margins.

4.????? When suppliers did not pass on (gift) a portion of the cost increase to the retailer, there are many stories of the retailers increasing retail prices beyond the proposed RRP increase to increase their margins (as is their right).

5.????? When suppliers said ‘no’ to waiving a portion of their price increase, supplier’s promotional plans were allegedly cancelled having the result of both reducing the supplier’s sales (a punishment?) and on average increasing the cost of those products to shoppers whilst likely increasing the retailer's margins.

6.????? When a retailer chooses to increase the retail price beyond the RRP, the other retailers follow (as is their right) – just about in real time, independent of how their input costs have moved. They have opportunistically taken price up and harvested incremental margin at the shopper’s expense.

7.????? The retailers have posted record profits over this time frame. Not a disputed fact.

It is not my place to suggest that retailers have gouged – I am sure there are many other dynamics at play that may cloud the picture.

What seems incongruous however is that the retailer's senior leaders deny the above alleged behaviours. They either are unaware of their teams’ actions or are not inclined to be transparent.

It feels like we are at an industry turning point. We have endless social and mainstream media, challenging the retailer’s behaviour, ACCC inquiries, senate inquiries and a review of the Grocery Code.

The pressure on supplier’s is only going to increase as some of the alleged retailer’s poor behaviour comes under the spotlight. The buyers profit and margin targets are not going to soften. They are likely going to have to drop retail prices to address the media and investigatory concerns. They are going to come at suppliers hard to fund these reductions (we are already seeing this today) – dropping their own profit margins will likely be the very last thing they will do.

In the last 3 years, the NextGen team have been front and centre to much of the conflict between suppliers and retailers. We have supported over 200 suppliers secure over $2.5bn of cost recovery. We have helped negotiate over 50 sets of trading terms and private label agreements. We know how to support suppliers in negotiating in the toughest commercial environment we have seen in decades.

Suppliers are going to have to play a different game negotiating in a deflationary environment. Is using the same negotiation tools as the retailers going to give you a competitive advantage? We can help you outgap gap! Give us a call!

#NAVIGATOR

#GOUGING

#NEGOTIATION

#THE PROGRAM YOU GO ON AFTER GAP