A complex Information-based System



Download 105.36 Kb.
Date conversion17.01.2017
Size105.36 Kb.
A Complex Information-based System

The following series of articles are taken from The Age and The Sydney Morning Herald. They describe and analyse aspects of the system(s) which supply fruit and vegetables to Australia's main cities. The overview articles are purely descriptive, but the other articles contain various points of view about the system, how it works, to whose advantage, etc. I have grouped the articles roughly according to the main point of view which they represent, but note that each article contains some

Contents
1. Overview

Supermarkets, growers take fresh approach 2

Green giants are gobbling up the little growers 4
2. The Producers

Woolies the worm in that plastic fruit 6

Farmers say big two are leaving them in a jam 9

Down on the farm, a mystery: who pockets the profit? 11

Scale drives family farms that are growing to survive 13
3. The Wholesaler

Growers going direct to sidestep markets' secrecy 14

Brothers know the perils of both sides 16
4. The Big Retailer

Market smiles and the forklifts scurry when 'guru' drops in 17

Cashing in on shoppers' confidence 18


Woolies plays fair and there's room for all, says chief 19
5. The Small Retailer

Grocers keep a close eye on their two big brothers 21

Small operators seize the day as customers seek more 23
choice and variety

6. The Regulators and Customers

MPs demand inquiry into the power of two 24
Supermarkets, growers take fresh approach

January 25 2003


Where does your supermarket produce come from? Lyall Johnson

follows the food chain.
[See also the graphic which came with this article, included as a .jpg file on the unit web site]

__________________________________________________________________________



As the bushfire haze of last Monday morning reached Peter Cochrane's small farm near Cranbourne, his workers were already pulling out bunches of spring onions.
Supermarket chain Safeway had ordered the onions the week before and they were due on the shelves on Wednesday. As it turned out, the Camberwell supermarket where some of the spring onions were delivered, had them on the shelf at 7.30pm Tuesday - about 35 hours after they had left the ground.
The image some consumers have of produce, especially in the supermarket chains, is of fruit and vegetables languishing in cool rooms or freezers for weeks, even months, before they are brought out.
Certainly, some do. Bananas are ripened either in a box with an ethylene gas or in special ripening rooms to stop them being damaged or going off during the days of transport from the north.

The latter practice is also to comply with government fruit fly prevention regulations that prohibit the transport of ripe fruit into Victoria.

And because they are seasonal, apples, pears and sometimes even grapes are kept in "controlled atmosphere" storage and ordered throughout the year to ensure year-round availability.
But for Mr Cochrane and the state's thousands of vegetable growers, Monday's consignment was just another order on a normal day.
About 80 per cent of Victoria's fruit and vegetables are grown locally and delivered to retailers within 48 hours of leaving the farms.
At Mr Cochrane's Devon Meadows farm, the time from ground to cool room is about 30 minutes. The onions are bunched and tagged in the field and placed in lots of 200 in a large bin.
Within minutes of leaving the ground they are brought to the shed, washed twice - once in a tub and then under high-pressure water - before being placed 20 to a crate in the cool room.
Mr Cochrane has an 8.15am time slot at which he delivers to Safeway every morning. Therefore, the onions are kept overnight at four degrees.
In theory, produce could be on shelves within a day.
According to Safeway's senior produce buyer Robert Bolge, the company is acutely aware of maintaining an efficient supply chain between the field and the consumer. Usually, the supermarket chain carries only half-a-day's supply at its Melbourne distribution centre, a 21,447-square-metre fruit and vegetable "refrigerator" at Mulgrave.
All stores get at least one order of fresh produce a day.
Mr Bolge says Safeway sources about 60 to 70 per cent of its produce from local growers. The rest is bought through brokers at the Melbourne Market Authority in West Melbourne.

The authority's chief executive, Bob Penter, says locally grown produce brought to market is sold to local greengrocers as well as supermarket chains. It is here that the "market price" of fresh produce is set.

Mr Penter said there was a whole other debate to be had on whether independent grocers buying through the market provided a greater diversity of produce than supermarkets in terms of shapes and sizes. But he agreed the food industry was the most efficient it had ever been in getting fresh produce to consumers.

This story was found at: http://www.theage.com.au/articles/2003/01/24/1042911546533.html



Green giants are gobbling up the little growers

July 8 2002



The supermarket supremos Woolworths and Coles are exerting enormous

influence even beyond the farm gate, Consumer Writer Matt Wade reports.
Australians' love affair with Coles and Woolworths has helped drive thousands of fruit and vegetable sellers to the wall and is forcing many farmers to get bigger or get out. Amid continuing allegations that the two supermarket superpowers are squeezing both smaller rivals and producers on the price of fruit and vegetables, there is growing concern about the power they have over the cultivation, distribution and sale of food.
"The two big retailers are exerting incredible influence down the food supply chain," said a Sydney University economic geographer, Dr Bill Pritchard. "Corporate strategy these days is all about controlling systems without owning them and that's certainly what Woolworths and Coles are doing with the supply of food."
The buying power of this mighty duo means that they influence the size of farms, which crops are planted, how they are grown, how they are transported, and what price they fetch.

A new report for the Productivity Commission by the consultants Retailworks said the number of independent fruit and vegetable retailers plunged by 56 per cent between 1992 and 1999 - from 3670 to 1611.

It attributed the decline to "aggressive activity" by the big two, saying Coles and

Woolworths control 65 to 70 per cent of the take-home fresh food market.


"Australia has the most concentrated take-home food market in the world," said the

managing director of Retailworks, Martin Kneebone. "No-one else in the world would have two players with even a 25 per cent share - we are very distorted in that respect."


A 1999 parliamentary inquiry into food retailing concluded that it was "heavily

concentrated and oligopolistic in nature" but the market share of the two supermarket giants has continued to expand.


The National Association of Retail Grocers of Australia, which represents small food retailers, says many of its members are victims of the market power of the giants.
"Successful independents are being strategically targeted by Coles and Woolies," said its national spokesman, Alan McKenzie.
At the other end of the food supply chain, farmers are angry about the creeping influence Coles and Woolworths have on them.
Woolworths buys 25 per cent of all the fruit and vegetables grown in Australia and about 15 per cent of the meat for its 680 supermarkets.
Coles and its counterpart Bi-Lo, owned by Australia's biggest retailer, Coles Myer, have more than 520 supermarkets and sales of about $16 billion a year.
Such is their ascendancy, that most of the Woolworths and Coles suppliers contacted by the Herald were unwilling to comment on their experiences in dealing with them. Some analysts say that even multinationals such as Kelloggs, Nestle and Colgate are careful not to upset them.

"No major supplier, no matter how big or powerful they are, can afford to be offside, or out of favour, with Coles or Woolworths," said Mr McKenzie.

Adjunct Professor Barry McGlasson, a University of Western Sydney food specialist and Woolworths consultant, said the trend for farmers to increase size and production was being accelerated by the supermarket majors.
"We are seeing the growth of larger private growers and corporate growers," he said. "Smaller growers are also forming themselves into marketing groups so they can do business with the likes of Coles and Woolworths."
The number of fruit and vegetable farms turning over more than $200,000 a year is rising, says the Bureau of Statistics, while the number of smaller growers is declining.
Up to half of the fresh fruit and vegetables that end up in Woolworths stores are sourced directly from farms. Many analysts believe this is bound to grow, adding pressure for producers to expand because the big retailers favour those who can deliver big volumes over long periods.
As well, say growers, Woolies and Coles only buy produce from growers accredited withthe companies' quality control systems, which regulate everything from fertilisers and chemicals to the size and appearance of produce and how it is transported.
Food retail analysts say the supermarket giants are now defining the nature of cultivation. The food retail consultants Cap Gemini Ernst and Young said agriculture was moving from a "product oriented" approach to a "demand oriented" approach where the big retailers drive decisions about crops.
The chief executive of Woolworths, Roger Corbett, denied that the company was abusing its position and described its relationship with suppliers as "outstanding". He said Woolworths did not target small players. "We make no apology for doing all we can to offer customers unbeatable value."

Mr Corbett conceded that the grocery market was an oligopoly, but said Woolworths would continue to seek a bigger stake. Coles, which declined to be interviewed for this series, also has plans to expand, meaning the pressure on small retailers and growers is unlikely to ease.

This article can be found at http://www.smh.com.au/articles/2002/07/10/1026185061953.html
Woolies the worm in that plastic fruit

By Matt Wade and Michael Bradley

July 9 2002
Australians are eating poorer tasting fruit, treated with increasing amounts of chemicals, because of stringent quality specifications by Woolworths, says the nation's largest citrus grower-packer.
"Woolworths just wants more and more plastic fruit," said Steve Twomey, domestic sales manager for Vitor Marketing in Renmark. "They only care that it looks shiny and beautiful."
He said the response from growers wanting to sell to Woolworths, which buys a quarter of all Australia's fruit and vegetables, had been to increase their use of pesticides and fungicides to reduce blemishes.
Many growers and food experts are concerned about the increasing standardisation of the food supply chain which the big two supermarket companies demand.
As their market share increases, Coles and Woolworths influence what happens to the fruit or vegetables they buy - from the time they are planted.
They insist that suppliers have standard systems which allow them to track when the

produce was harvested, who picked it, which batch it was part of, and the temperature during storage and transport.


Small growers must pay thousands of dollars a year to maintain their standards

accreditation and this eats into their profitability.


Big retailers believe that their standardised systems protect consumers and help growers to be more efficient. The tracking systems assure quality and allow the source of any contaminated food to be pinpointed.
But some experts are concerned that this increasingly regimented supply chain makes it more vulnerable to disruption and contamination.

Dr Bill Pritchard, an economic geographer at Sydney University, warned: "We are

provisioning our population in very new ways. It seems terrific when the systems are working well, but if things go awry we will have a few issues to confront.

"A more concentrated chain with more distances for food to travel means more

opportunities for major food scares - this is an issue lurking in the background."


Mr Twomey said the quality demands meant that new varieties of citrus, capable of

producing larger, shinier fruit, were being planted.


"We now replace 3 per cent of our trees every year," he said. "They might look better, peel easier, they might be seedless, but they don't taste any better and I don't think they are going to be the saviour of our citrus industry."
Mr Twomey said more than half of Vitor's 50,000 tonnes of produce was now exported because "Woolies are too hard to deal with".
"They will reject fruit if it has three square centimetres of its surface blemished, because they think consumers won't buy marked citrus - even though the fruit is identical under the skin."
Coles was not as stringent, but was "definitely moving in that direction".
Only about 30 per cent of Sydney's food is still grown in NSW. The rest is trucked vast distances to the nation's biggest food market using "cool chain" technology to maximise its life.
Professor Barry McGlasson, a fresh food distribution specialist from the University of Western Sydney, said temperature management was "the most effective tool we've got to slow down loss of quality in fresh food".
The supermarkets are investing millions in their own cost-effective distribution systems.
The latest high-technology addition to the Woolworths fresh-food distribution system is Building X, a huge sealed structure above the rabble at the western apex of Flemington Markets.
As mysterious as its name suggests, Building X is shielded by boom gates, monitored by security guards and under constant video surveillance.

Woolworths bought it last year from the failed Franklins chain, gutting the building and transforming it into a state-of-the-art food distribution centre.

A loading area the size of three football fields processes more than 25,000 boxes of fresh fruit and vegetables each day.
The 80 staff are always dressed for winter. The temperature never rises above 14C, and very sensitive produce, such as mushrooms and lettuce, is cooled to about 2C. Another vast coolroom, kept at 8C, is used for apples.
Electric forklifts ferry pallets of produce through automatic plastic doors that separate the coolrooms from the loading area, where arriving produce undergoes immediate quality assessment. It is sent back if it does not fit Woolworths specifications.
Staff take digital photos of rejected produce and email the images to the grower within hours.
There is evidence the scale of the big food retailers is benefiting consumers and some economists argue that big players are appropriate for the sparsely populated Australian market because they have the economies of scale to keep costs down.
Roger Corbett, chief executive of Woolworths, is adamant that consumers are the big winners.
"We have nationalised our buying and distribution and when you do that there are

enormous economies of scale. We pass these lower costs on to customers as lower prices."


Woolworths will spend $1 billion improving its supply and distribution systems over the next five years.
The Australian Consumers' Association says the food and grocery market is still

competitive and that consumers are happy.


"Coles and especially Woolworths are obviously appealing to consumers," said ACA's chief executive, Louise Sylvan. "They are offering the sort of thing that consumers want to see."
Although the ACA would become concerned if the market share of the major chains

jumped higher, "it's something that we do need to watch".

This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185062222.html


Farmers say big two are leaving them in a jam

By Michael Bradley



July 9 2002
Phillip Andreatta is crushed. The grape grower says he has wasted too much time and money on building a relationship with Woolworths and is about to sever his ties with the supermarket.
For the past 12 years, Mr Andreatta has supplied his local Woolworths in Griffith with 30 per cent of his produce on the understanding it matches the price he receives at market (minus transport costs) for the remaining 70 per cent.
In return, he has had to comply with Woolworths' compulsory quality assurance scheme. He has undertaken a three-day training course at his own expense. He pays $1200 a year in auditing costs, a further $600 annually in associated insurance costs and spends up to an hour a night filling in the supermarket's documentation.
But the arrangement, at least for Mr Andreatta, is no longer running smoothly.
His grapes regularly top the market at Flemington, fetching up to $30 per 10-kilogram box. Yet the supermarket, he claims, is offering only $22 a box for the same quality grapes.
"They know what I'm getting through the markets, but they say they can't afford to pay me that sort of money.
"When I contacted their produce manager, she said: 'We're not paying you any more. You can ring up head office if you like. We don't care."'
Mr Andreatta would be better off selling all his grapes through Flemington, but says this decision is complicated by the fact he has invested a lot of time and money in complying with Woolworths' quality assurance scheme.

He says Woolworths has made it clear to him that if he lets his accreditation lapse, it would be harder for him to be approved next time around if he wants to return to the fold.

But Woolworths CEO Roger Corbett says that individual supermarket managers are not authorised to enter into any such agreement with growers.
This may explain why Mr Andreatta and the other local growers he says are in the same situation have never been able to get anything in writing.
He might take a lesson from Lester Donges, a former cherry grower from Young, who says about the big two: "The supermarket system is destroying the fruit and vegetable industry in this country."
Until he opted out of the game in 1992, Mr Donges says the supermarkets used to put the cherries on sale but, several days afterwards, would return the unsold stock to his agent (Flemington Market) on the grounds of poor quality. The cherries would have to be resold, reducing the overall price.
"It happened to me many times and, from what I hear from other growers, it still is."
Mr Corbett says the company's quality assurance checks would not allow sub-standard fruit to leave the distribution centre.
But the NSW Farmers Association hears many such claims. "With many of the grower complaints we receive, it is claimed that fruit has been returned two or three days after purchase," said the body's general manager of policy, Mick Keogh. "It is very difficult to get to the bottom of this because there are legitimate grounds for retailers to reject poor quality fruit."
Mr Donges's reaction was to try his luck at food processing and tourism. These days, he converts more than 150 tonnes of Young's rejected cherries into cherry jam and is the country's sole manufacturer of canned cherries.
He supplies Yoplait, McDonald's and bakeries in Melbourne and is negotiating export contracts. "We're an overnight success, but it's taken us 12 years to get here," he said.

And Woolworths is back in the picture. After carrying his Young Maid jam for seven years, the supermarket wants him to fund a promotional campaign through a 20 per cent levy.

"They already take 18 per cent of my money in rebates, warehousing costs and fees, just for putting a ticket on the shelf," he said. "Now they want another 20 per cent and they can't even guarantee a good location on the shelf. They make more money out of the promotion of a product than they do selling it."
Mr Donges's jam retails for $3.17 and from this he says he nets less than $2.10. He says he can't afford the extra 20 per cent, as the $2.10 is already under the cost of production.
He says he sells his jam through Woolworths at a loss to establish brand presence and to advertise his factory in Young, which is the real money spinner.
The factory's tours, retail shop, and 120-seat restaurant account for 80 per cent of his turnover.
"What Woolies and Coles don't realise is that the consumer doesn't really care much about them," he said.
"The rapport is between the consumer and me. The supermarket is just a shelf."
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185062030.html

Down on the farm, a mystery: who pockets the profit?

By Michael Bradley



July 8 2002
Inflationary fruit ... Peter Davidson has yet to discover how the price of his navel oranges rose from the 13¢ a kilogram he was paid to $3 at the supermarket. Photo: Penny Bradfield
The saga of Peter Davidson's navel oranges represents one of NSW farming's more delicious mysteries.
When they left his Leeton farm gate, Mr Davidson received 13¢ a kilogram. A few days later they appeared in a supermarket near you priced at $3.

How the price rose by so much and exactly who got the money is a puzzle Mr Davidson has never solved. But in this he is not alone - the NSW Department of Agriculture studied the case of the inflationary oranges for over a year before admitting that it, too, did not have a clue.

Two years ago, concerned that growers were not being paid fair prices, the department established a horticulture market chain committee.
Its role was to determine the relative profit margins of growers, wholesalers and retailers based on information supplied by growers, retailers and the Tax Office.
According to an internal departmental document obtained by the Herald, the group's research, which was never made public, found Mr Davidson's mystery to be a common one.
The committee looked at six crops, including lettuce. In principle, the arithmetic is simple. Given a wholesale price of $8 for a box of 20 lettuce, researchers calculated the grower made a profit of $1.29, or about 6¢ a lettuce.
The researchers determined a 50 per cent retail mark-up would be profitable for the retailer. Yet instead of retailing at $12 a box, or 60¢ a lettuce, customers were charged $2.48 a lettuce - more than four times that amount.
When the same model was applied to apples, the committee found a 13kg box costing $21 wholesale would still produce a profit for retailers if they sold the apples at $2.42 a kilogram. Yet the apples retailed at $3.99.
For navel oranges sold at wholesale for $666 a tonne researchers again calculated that a 50 per cent mark-up to 99¢ a kilogram would produce a profit for retailers. Yet the oranges retailed for $3.99 - more than four times that amount. NSW Agriculture was unable to explain the black hole it had uncovered. The research was shelved.
Doug Hocking, NSW Agriculture's program manager for horticultural products and plant protection, chaired the committee.
He blames a lack of transparency within the market's wholesale and retail sectors for the committee's inability to determine "who's doing what to whom".

Asked if the research had satisfied him that no profiteering was taking place within the wholesale or retail sectors, he says: "It depends how you define profiteering. People are in this business to make money.

"If you've got two major retailers, 150 wholesalers, and 10,000 suppliers, any economic training will tell you that it's the 10,000 that will be competing."
Peter Davidson began harvesting this year's crop three weeks ago. He says prices were initially good, at about $1 a kilogram, but a rise in the volume of small fruit on the market has caused a general fall in prices.
His best fruit is now worth 35¢ a kilogram while his smaller fruit is worth only 8¢ a kilogram to juice producers. "As soon as you get the slightest over-supply on the domestic market, the supply and demand chain drive the price down," he says.
"Everybody takes their slice of the action.
"Woolworths says it only makes 3¢ in the dollar on fruit, but when you see those mark-ups, I don't think growers are getting a fair proportion of the consumer dollar."
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185061890.html
Scale drives family farms that are growing to survive

By Matt Wade

July 8 2002
The Tolsons started growing mushrooms in Sydney's north-west more than 40 years ago, when a pound of their product sold for the same price as a pound of prawns. Their prices have not kept pace with shellfish, but the Tolson Group has grown into the biggest privately owned mushroom producer in Australia.

The group's expansion into a multi-million dollar business illustrates the pressures on modern agricultural producers to scale up or get out. "It's all about creating efficiencies," said David Tolson, who manages the family's biggest farm. "That's agriculture in a nutshell these days."

The demands of the big food retailers has fuelled the process. They favour producers who can supply in bulk throughout the year and have the low cost structures that come with economies of scale. That is what the Tolson family has done, investing $20 million along the way to expand the family firm.
Their network of farms in the Hawkesbury district, which trade under the White Prince Mushrooms brand, pump out 115 tonnes of mushrooms a week, harvesting every day of the year except Christmas and Good Friday. The farm Mr Tolson runs near Windsor produces 2.3 million tonnes a year.
Its massive air conditioning system - which ensures the trays of growing mushrooms remain at exactly the right temperature - has the capacity to create more than 400 tonnes of ice an hour. "The power company loves us," Mr Tolson said.
The size of the operation is a key to the company's survival. "There are only a few small farms left around here now - it just gets less and less viable for the small players because you have so many fixed costs," he said.
The margins for mushroom growers are so narrow it is difficult to break into the business, even for big investors, he said. The Tolsons export about 10 per ent of their produce, mostly to Asian markets, but most of it still ends up on dinner plates in Sydney.
Traditionally, the family distributed its mushrooms through wholesalers at Flemington markets, but changes to the supply chain - driven by the supermarket giants - have presented a fresh challenge. Growers of all sizes are under pressure to supply direct to the big chains. Woolworths already gets about half its fresh produce this way.

The Tolsons experimented with this last year, but found they could not sell all their produce. Supermarkets do not stock all the mushroom varieties their massive growing facilities can produce. Agents, however, can still find a buyer for the Tolson Group's entire output.

Nevertheless, a portion of their mushrooms is being trucked directly to Woolworths-owned Safeway supermarkets in Victoria, and Mr Tolson admits that this is probably the way of the future.
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185061881.html
Growers going direct to sidestep markets' secrecy

July 9 2002



Farmers can avoid agents' commissions by selling direct to a supermarket, Michael Bradley writes.
Flemington Markets is no place for the faint hearted. The toughness of the wholesale agents who run the massive fruit and vegetable markets is legendary.
And the commission they apply to goods between the farm and the retail outlets is a no-go area for discussion.
This secrecy over pricing is causing widespread dissatisfaction, the new retail grocery industry ombudsman, David Holst, is discovering.
But Colin Gray, head of the NSW Chamber of Fruit and Vegetable Industries, speaks for the agents when he says: "If they don't like it [the market system], there is a simple thing they can do. Go somewhere else."
Flemington is the nerve centre of NSW's food supply network. On a busy night, about 1100 semi-trailers unload produce from around the country. Its 137 wholesale agents handle 80 per cent of Sydney's fresh produce - worth about $1.6 billion a year - as it moves from grower to retailer. And cutting a swathe through it all, neatly outfitted in their "uniforms" of white shirt, tie and warm sweater, are buyers for the big two, Woolworths and Coles.
Increasingly, these buyers are bypassing the agents and their 10 per cent commissions to source produce direct from growers.

Mr Gray says Woolworths still buys 75 per cent of its produce through Flemington. But Roger Corbett, chief executive of Woolworths, said the company reduced such purchases to 50 per cent last year.

It is a move welcomed by many growers, who say it avoids the uncertainty and secrecy sometimes associated with selling through Flemington.
The NSW Farmers Association is one of Flemington's loudest critics. "What happens at Flemington is a grower consigns his produce to an agent and some time later the agent will advise him of its value," says the association's spokesman, Mick Keogh.
"Where it has gone, who bought it, whether or not the agent bought it himself, or if he is a contract buyer to a supermarket, or whether or not it's a fair price, is very difficult to determine.
"It is very difficult for growers to gain access to information and of course the produce is long gone by the time anything happens in terms of trying to redress a grievance."
Since the industry ombudsman's position was established late last year, David Holst has received 27 formal complaints.
But he says that the number and frequency of inquiries is rising as awareness of his position increases.
"Of the complaints we receive, the overwhelming majority are from growers who doubt the authenticity of the prices being paid by their agents," he says. "They believe the agents are taking more than the authorised commission."
Of the 12 cases so far resolved, nine have concluded with the agent agreeing to pay compensation.
"Growers want to know who is buying the product and how much they're paying," Mr Holst says. "But agents don't want them to know because they fear growers would then deal directly with retailers."
Many growers believe there is a conflict of interest among agents, many of whom buy for the big chains, Mr Keogh says.
"The major supermarkets pay them a commission to buy on their behalf, so it's not clear who the buyers are actually buying for," he says.

The fact that 50 per cent of Flemington agents are also growers, and 10 per cent are also retailers, further complicates the situation.

The Chamber of Fruit and Vegetable Industries' Mr Gray, however, believes most growers are happy with their agents. Information on who an agent has sold produce to and for what price should not concern growers, he says.
"If the grower wants to own the product from the time he puts it in the ground until the time it ends up as sewage out the back of Bondi, let him come here and do it," he says.
Mr Gray says he received 94 grower complaints last year. Bearing in mind that the markets received 3 million consignments in that time, he calculates the markets enjoys an extremely high satisfaction rate.
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185062140.html

Brothers know the perils of both sides

By Michael Bradley

July 9 2002
"It's a free country" ... but Flemington fruit and veg agents Rocco and Joe Antico can understand growers' complaints about prices. Photo: Penny Bradfield
Flemington fruit and vegetable agent Rocco Antico says the increasing number of growers bypassing wholesalers to deal directly with supermarket chains are exercising their free-market right to choose.
The 78-year-old, who started his wholesale business in 1953, is indifferent about the threat to his livelihood. "It's a free country. Growers can sell to whoever they like."
Mr Antico and his brothers Joe, Tony and Mick have more than 170 years fruit and veg wholesale experience between them. They employ 15 full-time staff at their business Sinclair & Antico and enjoy an annual turnover of more than $16 million.

Like many other agents, the brothers are also growers, with a 4500 hectare property on the Murray River which produces fruit, vegetables, stone fruit, olive oil and wine and table grapes, so brother Joe, 62, can understand the growers' decision.

"The wholesale price for a lot of fruit and veg is very cheap and quite often it's not reflected at the retail end," he says.
The Anticos say it is not uncommon to see Woolworths or Coles manipulate the market price of a product by creating an over-supply - and therefore a decline in price - by simply not purchasing it for one or two days.
It is a claim repeated by many market players, yet strongly rejected by Woolworths CEO Roger Corbett.
Wholesalers are also often blamed for profiteering, but Joe is adamant his business is transparent.
"Any grower's welcome to come and inspect our books any day," he says.
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185062072.html
Market smiles and the forklifts scurry when 'guru' drops in

July 9 2002

They call him "the guru" and when he walks the floor of Flemington Market, the sea of forklift trucks parts. Other pedestrians take their life in their hands amid the pre-dawn chaos, but no-one would dare run down John Cassone - the senior Woolworths buyer.
The guru buys more fruit and vegetables than anyone in NSW - about 6000 tonnes a week for 215 supermarkets.
His day starts at 5am with a "warehouse walk" to review stocks and by 5.30am the phones at the buying office in Homebush are running hot with unexpected orders from supermarkets.
At 6am Mr Cassone starts shopping. The handshaking is endless. "I often shake hands with the same guy three times in one day; it's one of the protocols around here."

Most of the produce is pre-ordered direct from growers or agents, but there is usually plenty of extra buying to do most mornings and Mr Cassone uses this time to check the quality of what is on offer.

He paces Flemington for up to three hours a day "getting a feel for the market". "Everyone here is trying to work out where prices are going," he says. "It's a matter of spotting opportunities."
This morning, wintry weather has hit the supply of broccoli which is as "rare as rocking horse shit", according to one market figure. That's not good news for Woolworths, who are running a statewide special on broccoli.
Corporations still cannot control the climate. "No matter how big you are, the weather is a huge factor in this business," says Mr Cassone.
But the tomato market looks like it is about to move in Woolies' favour. There are a mass of quality tomatoes apparently unsold and the first crops from far north Queensland are starting to arrive. A supply glut will drop prices.
Mr Cassone greets the Coles buyers with a polite nod. "We check out what each other is buying a fair bit. You have to know what your opposition is doing," he says.
By 10am, it is all over bar the paperwork.
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185062101.html
Cashing in on shoppers' confidence

By Matt Wade

July 10 2002
When supermarkets first appeared in Australia's suburbs in the early 1960s, shoppers treated them as a place to find their preferred brands under one roof. But today Woolworths and Coles have become the brand, and don't hesitate to wield all the power that brings.
Consumers trust food retailers to stock quality food regardless of the brand, and the big retailers are cashing in on this faith, according to a report by retail consultants Cap Gemini Ernst and Young.

The report, "State of the art in food", predicts the trend will see retailers operating as a "kind of consumer buying agent or protector of consumers' interests".

The relationship between stores such as Woolworths and Coles, and other big brands such as Coca-Cola, Nestle and Arnotts, is becoming increasingly tense as they compete for consumer loyalty, said the report. "Retailers are trying to influence the consumer mindset by presenting themselves as brands. The result is an increasing blurring of the lines between the retail and manufacturer segments."
Manufacturers are countering the rise of the retail brands by expanding methods of direct selling through vending machines, factory stores, catering services and Internet sales.
Agricultural producers are also looking for ways to sell direct to consumers, with farmers' markets and advertising campaigns by growers' groups.
Woolworths and Coles have used the strength of their brands to open up new markets. "The fresh food people" and "serving you better" are among Australia's most recognisable corporate slogans.
Both are aggressively expanding their liquor selling activities and Woolworths has grabbed a big share of the petrol market.
They are also big players in online shopping, with Woolworths recently acquiring Greengrocer.com.
A study by brand consultancy Interbrand ranked Woolworths as Australia's sixth most valuable brand.
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185062246.html

Woolies plays fair and there's room for all, says chief
By Matt Wade, Consumer Writer

July 11 2002



Sydney Morning Herald
Woolworths has hit back at claims by farmers and small retailers that food retailing is too concentrated and big supermarket chains have excessive influence on the food supply chain.

The chief executive of the supermarket group, Roger Corbett, said the sector was highly competitive and there were many alternatives to the big supermarkets.

"There are a whole host of butcher shops, a whole host of produce shops, and fish shops, which are doing really well," he said. "We are all out there competing to deliver customers the best possible value."
He dismissed allegations by the National Association of Retail Grocers that the major chains target small players.
"Woolworths never knowingly targets small operators by reducing our prices below them, except in the case when we have a general advertised special.
"Many small retailers have prices that are higher because they are offering a different type of service."
Mr Corbett said Woolworths received few complaints from growers. "This idea that Woolworths and Coles dominate the [produce] market - if you go out to the real world and out to the fields of those people who are our suppliers, you are important to them, but they are pretty important to us too. It's a mutual kind of interdependence."
When he visited growers he received little negative feedback, even though he "goes asking for it", he said.
Woolworths had a special hotline for suppliers to pass on problems or concerns. "We buy in the marketplace responsibly.
"We buy at fair prices. We expect to buy well and we don't expect to buy less well than anyone else but our business is sought after and really appreciated in the market, both by growers and by agents.
"We get very few complaints, full stop."
Growers told the Herald that Woolworths' quality standards had made the big retailer difficult to deal with and were forcing them to use more chemicals to meet those standards. But Mr Corbett said the company's quality benchmarks were not negotiable.
"The standards system is defined very clearly and endeavours to be fair and objective.

"We do not in any way rationalise our requirement for quality - that's the quality our customers want to buy. We have a perfect right to specify that," he said.

Mr Corbett said research the firm conducted during the 1999 Baird inquiry into the retailing sector found many areas without a Woolworths store wanted one.
"The vast majority of people are looking for a Woolies store," he said.
"It provides job opportunities, career opportunities and, in many cases, stops the group shopping outside of those areas. Woolworths is a real Aussie icon and I am proud of it."
Coles Myer, owner of the Coles and Bi-Lo supermarket chains, yesterday made no comment in response to the concerns raised. Coles declined to be interviewed for the Herald's Food Chain series and refused to respond to written questions on the grounds that the area was "commercially sensitive".
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185065161.html

Grocers keep a close eye on their two big brothers

July 8 2002


Small independent grocers are being asked to act as competition police to pinpoint abuses of market power by their big supermarket competitors Coles and Woolworths.
At the same time, NSW farmers are setting up a network of growers' markets in response to a market dominated by the country's two biggest buyers of fresh produce.
The National Association of Retail Grocers of Australia has sent guidelines to its 4000 members to help them identify when they fall victim to anti-competitive tactics by the big two supermarket chains.
The association believes Coles and Woolworths are attacking many successful independent supermarkets by selectively dropping prices to unsustainable levels to weaken the competitors.

It has called on the Federal Government to toughen up the competition watchdog's capacity to fight predatory pricing and abuses of market power as part of its current review of the Trade Practices Act.

Alan Mackenzie, spokesman for the grocers' association, said it had collected a swag of "interesting" evidence against Woolworths and Coles which would be forwarded to the Australian Competition and Consumer Commission.
"It's getting more and more difficult to prove abuses of market power, especially when the big corporates can hire all their lawyers from the big end of town," Mr McKenzie said.
"But we believe there are some cases that might allow us to proceed against the majors."
The association claims the market share of Coles and Woolworths has risen to about 80 per cent of the packaged grocery market since the demise of Franklins supermarkets last year.
"The bottom line is that Woolies and Coles continue to increase their domination over the retail grocery market," Mr McKenzie said. "You don't have to be a genius to realise competition is dwindling."
But Woolworths and Coles claim their market share of the wider food, grocery and liquor market is around 50 per cent.
Jonathan McKeown, head of the NSW Farmers Federation, said many farmers were not happy with the returns they were getting and the growers' markets it hopes to launch in spring would deliver a better return and help keep them commercially viable. These will allow farmers to sell their produce direct to consumers.
Mr McKeown said that while food wholesalers and retailers controlled prices, farmers' markets across the state would provide "an alternative way for farmers to sell their produce, a better way".
Independent supermarket owners are also bracing for a fresh grab at market share by the giant food retailers later this year.
In October, a year-long moratorium on the sale of former Franklins stores to the big two will be lifted and, Mr McKenzie says, both have plans to buy what they can when the opportunity arises.

"We understand Coles Myer boss, John Fletcher, has a $50 million war chest to buy independents," he said. "They both have very aggressive store opening programs."

In March, Coles Myer unveiled plans to open about 35 new supermarkets in the coming year, a goal that suggests further acquisitions.
Woolworths' head, Roger Corbett, confirmed the company would buy more stores if they became available and claimed many independent operators relied on Woolworths to buy them out. "We are the superannuation fund for a lot of the independents," he said.
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185061946.html

Small operators seize the day as customers seek more choice and variety

By Michael Bradley

July 8 2002
While some shopkeepers believe the two big supermarket chains are driving the humble greengrocer out of business, George Angelidis thinks fruit and veg is a business worth getting into.
The co-owner of Leichhardt's Norton St Grocer does not see Woolworths or Coles as his competitors, nor does he believe customers are taken in by slick advertising campaigns.
"They [supermarkets] are always on the TV and the radio telling us how wonderful they are," he said. "It's all brainwashing ... consumers are astute and if they don't like what is being served up, they'll move on."
Supermarket staff make regular "fishing trips" to the Norton St Grocer to check what, how and for how much he is selling.
"I don't have any problem with it because the chains are not my enemy," Mr Angelidis said. "I don't compete directly with large supermarkets, because I'm not here selling nappies and Chinese noodles.
"People don't know quality unless they have something to compare it against, so I'm not concerned about big supermarkets. They make me look good."

Despite entering the fray in Leichhardt, which already had more than a dozen fresh produce outlets, including a Coles in the same shopping complex, and two Woolworths supermarkets, Mr Angelidis has managed to mix it with the big boys very well.

In December he was named retailer of the year by the Sydney Markets Association, and in February, Mr Angelidis opened the Metro Grocer in Marrickville.
He believes consumers are frustrated with the increasingly generic, franchised Australian supermarket. "Choice and variety are to the consumers' benefit, but they're being concentrated and choice has come down over the last few years.
"What's happening is the result of a 10-year campaign between three supermarkets and I don't believe it's a very positive outcome."
This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185061878.html

MPs demand inquiry into the power of two

By Matt Wade and Michael Bradley



July 10 2002
Tomorrow the world ... Coles and Woolworths are expanding aggressively.
National Party MPs are calling for a parliamentary inquiry into the powerful hold supermarket giants have on fruit and vegetable producers.
They have accused supermarkets of "picking off growers one by one" and squeezing farmers on prices at the same time as rural consumers are paying more than they should for food.
The federal member for Riverina, Kay Hull, said an inquiry was vital.
"My growers cannot collectively bargain with Woolworths because that's deemed to be anti-competitive, yet Woolworths can pick off my growers one by one, offering them nothing, and that's not anti-competitive," she said.
Many farmers and small retailers were disappointed that the 1999 Baird inquiry into the retailing sector had not led to significant reforms. It recommended a fresh review of the sector this year, but the Federal Government has not committed itself to do this.

The Nationals' De-Anne Kelly joined calls for a second inquiry, saying the situation in her north Queensland electorate of Dawson had significantly deteriorated since the Baird inquiry.

"There is simply no doubt that the market power in Australia is greatly skewed and big business has become even more arrogant than they were before. It's not just that they make life tougher for the smaller businesses, but I now see them attacking the ACCC [Australian Competition and Consumer Commission], who are really the only hope small business has."
The chairman of the ACCC, Allan Fels, said the watchdog was monitoring the Coles and Woolworths expansion. "The commission would take an interest in any acquisitions of existing supermarkets," he said.
The aggressive move into the liquor market by Coles and Woolworths had also caught its eye, he said.
"The commission is keeping a watch on the liquor retailing industry and has examined a number of acquisitions by Woolworths and Coles to determine whether they may breach the [Trade Practices] act."
Professor Fels said that, so far, no acquisitions had been found to breach the act. He has made a series of recommendations to the Federal Government's current review of the act, which he said could be improved to help protect competition in the sector.
A spokeswoman for Minister for Small Business, Joe Hockey, said he did not see a need for a fresh inquiry into the supermarkets until the outcome of the Government's review of the act was known.
However, Peter Webb, the NSW member for Monaro and a National, said a federal inquiry into the impact of the supermarket duopoly on regional consumers as well as growers had become imperative.
He recently compared the prices of groceries between two Woolworths stores, one in Cooma (a town with just two supermarkets, both Woolworths) and the other in Queanbeyan, which also has a Coles, an Aldi, and Canberra's shopping centres nearby.
Mr Webb found that prices paid in Cooma were consistently between 6 and 10 per cent higher than those in Queanbeyan.

This story was found at: http://www.smh.com.au/articles/2002/07/10/1026185062297.html









The database is protected by copyright ©hestories.info 2017
send message

    Main page