With the grocery giant Coles, still out there price cutting like a drunken soldier, discount milk, bread, fruit&veg, meat etc, one has to ask, just who is picking up the tab.

We all know production and transport/handling costs are up and the introduction of the carbon and renewable energy taxes have not helped.

So if Coles can sell cheaper, lots cheaper in many cases, yet, still achieve record profits, who is paying for the discounts.

More importantly,if it is the producers, as I suspect, is this fair, and should consumers feel guilty of supporting such unfair practices.

Perhaps the Goodman Fielder case is just the beginning of producers saying, enough is enough.

rehctub,

Have you never head of 'Lost Leaders' milk and bread are ideal examples of such items. The $1 bread and $2 milk are just that, lost leaders. Firstly screw the supplier for the best possible price, Goodman Fielder who supply Coles with their $1 bread, along with other high margin breads are one of those suppliers. Then position these lost leaders at the rear of the store, this will result in customers walking past lots of high margin items, some of which the average customer will purchase, as they make their way to the cheap bread and milk. I believe lost leaders only account for 2% to 4% of total sales. Take a little hit on 4% of your sales and at the same time score a big profit from the other 96%. No to mention the increase in sales from enticing customers into the store with lost leaders in the first place.

Allowing ourselves to get into the position of basically having a duopoly controlling our food markets is the biggest shame.

How did it happen - apathy, perhaps?

Poirot,
My partner and I do the bulk of our shopping at Aldi where the prices are substantially lower than 'name brands' of similar quality at Coles and W'worths. For fruit and veg we go to Paddy's where freshness is generally better than at the big two and prices can be as much as 1/2 to 1/3 of what they charge. Eg a couple of weeks back we bought whole watermelon (as you know us Greens love our watermelon ha ha) 20c/kg at market, next day at Coles it was 89c/kg big special. A careful shopper can save a lot of money over a year.

Soon Australia will have no dairy industry if this continues. Those losing out the most are dairy farmers who barely meet running costs. The lost leaders are not doing the supermarkets any harm but it is damaging Australia's long term agricultural sustainability.

And consumers are also part of the problem with an unwillingness to pay 'real costs'. This idea that everything must be cheap under consumerist growth mantra will have long term effects. What was wrong with budgeting and being careful with spending or saving to buy something. We are no better off overall given the personal debt-cycle fuelled by housing costs. The 'me me' society and overconsumption can only fail in the long term.

I am hoping there will be some last minute wisdom on these sorts of topics and that it won't take a disaster to shake things up.

Paul, I have been involved in retail my entire working life, so I am well aware of what a 'lost leader' is.

However, a lost leader, is just that, something that is sold at a loss, and I will almost guarantee that the likes of bread and milk (cheap) are at worst, sold at cost, at best, at very, very thin margins.

I say this because if the likes of GF sold their cheap bread to Coles even at cost, they would not pull their bread from sale, as the sheer volumes they sell, along with as you point out, their premium branded items would make the business well worthwhile.

Same goes for dairy farmers, because if Coles were selling cheap milk, at a loss, then the farmers would be doing hand stands from the sheer increase in volumes being sold.

The fact is, this is not happening, so I ask you, who is funding the loss leaders, the producers, or Coles themselves?

While I usually empathasise with and sipport farmers, I am less inclined to do so with those sectors such as sugar and milk where subsidies have propped up and distorted the market for many years. For example, both industries mentioned received direct and indirect subsidies to remain in marginal land and marginal locations and against competition.

The federal DPI strived for many years to encourage farmers in marginal areas to move to other crops, such as tropical fruits. There were seeding grants and large support offered. Arguably, the traditional subsidies for dairy and sugar also had negative health outcomes for the population. Dairy is not good for you in large quantities and now are canned fruits where high added sugar subsidised artificially lower prices for sweetened canned fruits over unsweetened products. There were also negative impacts on water quality (especially from high nitrogent fertiliser for sugar).

I cannot 'cry' for dairy farmers where millions of other workers have been forced for decades to cope with the job losses and family disruption from restructuring and globalisation.

Much of the angst directed at the big supermarkets is coming from the feckless Greens and other Left activists who hunt headlines. Protest groups with no solutions to offer except returning to the cave and gaia worship. That is not to say that the supermarkets do no wrong but government intervention would do worse, especially where driven by the lunar Greens and accident-prone Gillard.

Lower supermarket prices for staple items are helping pensioners and others on fixed incomes. Those people that Julia Gillard reckons don't vote for her and can be dismissed while she pursues directorships on company boards (fat chance!) to eke out that fat guvvy super she will receive after the election.

It is not a duopoly here as we have Woolies, Coles, IGA (ex Franklins)
2 0ff and Aldi.

Still the farmers complaint is valid.

I buy many of my food products from a Union hater.
It costs more, so many will not bother, but I like to think I am helping, despite his views about unions, a good bloke look after Australians.
Dick Smith.
Coles and its opponent, see we pay, for its cheap goods by purchasing the over priced stuff too.
Aldi? well chooks are cheap, service is too, in truth if we all bought every thing there we would soon seen no Aussie food on the shelfs.
Chook for under five bucks? steamed and seasoned? great.
But we all have the right to buy at our price range.
Those low income earners have to eat too.

There has been major restructuring of the dairy industry going on since the UK joined Europe and knocked back our butter. Necessary deregulation, welcoming big players and setting the (agriultural produce) aim at the Asian market are some of the major changes over time. Another consequence is the concentration of production in Victoria.

There are good reasons for all of it and LNP and Labor governments (I don't know about the Gillard/Greens outfit, but Labor up to then), State and federal, generally concur on what had to be done and the best strategies for the future. Given the long lead times, excellent communication, extension services and aid to affected farmers to move out of the industry, it is a stretch to say there is unfairness, unless change itself is unfair. But who can do anything about that?

The Greens protest party is scratching for country votes, trying to get headlines, and as per usual has the bull by the udder. Besides, the Greens still need to account for the increased bushfire devastation from their 'no burn off' policies.

Bazz,

Coles and Woolworths dominate the food retail market in Australia - that's near enough a duopoly.

The playing field is massively tilted in their favour.

http://www.foodmag.com.au/news/govt-needs-to-stop-coles-and-woolworths-dominance

Hi there PELICAN...

You said in part ,'...Australia will not have a Dairy Industry soon...' or similar words ? That would hardly be surprising, given we virtually have no industry here anyway ?

I do wonder, in fact it scares me, after the incredible demand for our resources ultimately wanes, then what ? We have a very large debt that needs to be serviced, we hand out millions to others without any notion nor expectation of a return, gee it worries me.

What's the future for my grandchildren's children ? I'm so glad I'll be dead, I couldn't bare watching this once great country implode, but what of the future for those I care for ?

God help us.

*The playing field is massively tilted in their favour.*

Not really, Poirot. The game is changing. Aldi now have 300 stores, 4 billion turnover and are about to add 60 WA stores and 50 SA stores.

They represent a whole new ball game. Discount everything to the bone. Globally Aldi are owned by one of the world's richest families, with 8000 stores.

It was actually Aldi who started the milk discount wars.

o sung wu, you are not alone in your way of thinking, and the really scary part about this is just how fast we have gone from the penthouse to the outhouse, courtesy of this incompitent government, who, by the way, think a seat on the UN is far more important than the caring of their own citizens.

Good questions rehctub,

I personally think the rot started in 1984 when GJ Coles was allowed to acquire Myer Stores. Their main supermarket rival Woolworths then reacted and they too started on the acquisition trail. Ladies fashion, fast food and fuel outlets all became fair game and today they own between them about 75% of all retail transactions.

I think the biggest problem has been allowing these giants to move their ownership back up the supply chain. One example is milk. Coles grew its volume of milk from Victorian dairies to beyond 40%. Initially good for the dairy farmers but they soon became captive suppliers.

With the help of Lindsey Fox (then a board member at Coles), they moved back up the supply chain to transport distribution from the farm gate, then the dairies and then the farms. They no longer had to generate profit from the supply chain and instead used their power to discount at store level. This is the pattern they use today.

The “loss leader” concept has now been replaced with finite calculations of margin control within the stores (Gross Margin Return on Investment per square meter of floor space). Through this mechanism they are able to “shift” margin in response to both competitive activity and profit opportunities.

They all now use massive computer power to analyze transaction level data and to shift this margin control overnight. That’s how they get the customer to pay for their own discounts.

The fuel prices at the bowser, pay for it. Even with the discount, they can be dearer than independents.

Yes spindoc, the rot did start back then and has almost been aided, rather than opposed by SUCCESIVE governments.

I was working for the hugely successful and new concept retailer, Pick n Pay back in 84 and at that time the retail market for basics, bread and milk were regulated.

They PNP argued that it was not fair for them to make so much money from the likes of bread, when all they did was bought and sold it.

It was they who introduced the trend, whereby the bread was delivered, then stacked on the shelves, then the returns removed, all paid for by the bread companies, as PNP never at any point, other than at the check out, handled the bread.

It was they (in Brisbane at least) who started the discount war.

They also had this idea, not sure if it was theirs or not, to rent out their shelf space, a practice that is now common in the big two. In fact, they must be close to a negative rent situation by now, whereby their rental income from suppliers, pay their land lords rent.

I remember back in 84 when Coke had a huge display, very prominent and they paid $150,000 for that space, I can't remember for how long.

I also remember the grocery manager telling me that they sold baked beans for one cent per can profit, but hienz paid huge rent for the space, which allowed them PNP to sell that cheap.

It's strange how successive governments have been hell bent on stopping media domination, yet allow such domination of retail + by the big two.

Small retailers no longer have a chance, and in fact, the mail is that IGA are on their knees, thanks to the milk war and pertrol discounts of the big two.

To think all this was allowed, in the name of competition, is disgraceful.

Coles, So who is paying for the discounts ?

Everyone except Coles !

Butcher old bean, you have a hide suggesting that the likes of Goodman Fielder should openly resist Wesfarmers and Woolworths. You seem to be suggesting that Woolies and Coles are the bad guys here.

If there was any corrupt trade practices occurring the ACCC would be right onto it sport. They handed out a fine of $10K to an electrician just down the road for an infringement only last week.

Just in the past year they have prosecuted under the ACL a plethora of hairdressers, restaurants, builders, tradesmen, pharmacies, etc, etc, in fact too many business types to list comprehensively.

I know you’re going to say that they don’t go after the “big guys”, but you would be wrong. They pinched Metricon Homes for flyers that misrepresented the products and Harvey Norman because of their shoddy warranty and replacement practices. These guys can sniff out corrupt business practices at a mile.

Just because Wesfarmers and Woolies sell us the majority of the consumables we go through is no reason to suggest duopoly or market place manipulation. They are great Australian companies who sent George’s corner shop and a load of other migrant crooks packing in their early days.

Today they are giving the independent liquor chains what is coming to then. Thankfully they hold more liquor licenses than any other entity in Australia and thank Christ they are the largest single owner of gaming machines in Australia.

They are also sorting out those bastard independent petrol stations who can discount without grocery vouchers, not to mention that those money grubbing opticians have been given a 20/20 vision shake up.

When my local hardware guy and his Mrs closed their doors I had a party, ding dong the witch is dead I sang at voice and looked for the shadow of the big green barn for savings.

This thread, a propaganda piece for sure. I have known that the ACCC has looked into every restriction of trade issue, from source to supermarket shelf and found these guys have no case to answer.

They out lived Grocery and Fuel watch, god luvem

Take a pill sonofgloin.

You are one of a very small minority and if you seriously think the likes of the big two are not ruining the retail, fuel, hardware etc industries, not to mention sending many suppliers to the wall, then you are simply blind my friend.

Now given you know so much about them, perhaps you can explain how their profits explode while their prices are slashed,and more so, who is paying form the discounts.

Remember, pre discounting their profit margins were only 3%.

God Butcher, The whole post was tongue in cheek,, I can't stand having two bastards getting a piece of everything I purchase. Where is the ACCC? They chase small business and let corporate do whatever they want, I am on your side Rehctub.

Rehctub, its all about supply chain efficiencies. Coles was a wreck when Wesfarmers took it over. Slowly its being reorganised and made more efficient. Waste is cut everywhere. Coles now have a million people a week more going through their doors. That means more turnover and lower fixed costs per unit sold.

In reality, much of global supermarket food is actually controlled by a few huge mega corportations, who sell under all sorts of brand names. Nestle, Kraft, P&G, J&J, Unilever, Kellogs etc. Coles have been asking them to justify why their prices in Australia are so much higher than in Britain, the US or NZ.

Coles never reduced the price which they paid processors for milk. So if farmers are paid less, blame Lion (owned by Mitsubishi) or Parlamatt (owned by a large french company now).

Yabby I agree with every thing in that post.
And to put it bluntly will buy at Coles, Aussie owned before most.
I see a different butcher here, no longer running his shops it appears his views on costs and returns, has done a 360.
Meat is best bought if not in bulk then from one of the big two.
I still thing buying Australian, at a reasonable premium, is worth it, protecting jobs and Aussie producers.
I can buy, dressed on farm, a whole lamb for $140, plus the fuel, so buying two is the affordable way.

Yabby>> In reality, much of global supermarket food is actually controlled by a few huge mega corportations, who sell under all sorts of brand names. Nestle, Kraft, P&G, J&J, Unilever, Kellogs etc. Coles have been asking them to justify why their prices in Australia are so much higher than in Britain, the US or NZ.<<

>> Indexes Difference

Consumer Prices in Australia are 65.11% higher than in United States

Consumer Prices Including Rent in Australia are 74.04% higher than in United States

Rent Prices in Australia are 94.88% higher than in United States

Restaurant Prices in Australia are 70.14% higher than in United States

Groceries Prices in Australia are 57.62% higher than in United States

Local Purchasing Power in Australia is 24.83% lower than in United States<<

http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+States&country2=Australia

Yes Yabby I love how Wesfarmers and Woolies are screwing us. It’s good to know those multinational brands can sell their stock for less than half in the U.S.

It makes me proud to be an Australian knowing I am paying the rest of the globes way.

You have told me in the past that we all gain from Woolies and Wesfarmers via our super investments. Stuff the investments I want my goods at global rate…not Wesfarmers and Woolies rate. You talk such apologist rhetoric rubbish Yabby, rubbish that blind Freddy knows is sheiser.

Belly>> Yabby I agree with every thing in that post.<<

God save us, Belly agrees with Yabby….Yabby the “people have no bread to eat but I’ve got cake” proponent, and Belly the lefty workingmans socialist. You must be getting your fair share of cake there as well Belly my china if you declare that Coles and Woolies are the peoples best retail friend.

Cheap prices are not just the beginning....it's your fantasy.

I have seen everything worth seeing now, Ying and Yang are gone, in Belly we have Yong, but no change in Yabby.

At the risk of being a bore, this is a post I did in September last year. Most of which I feel is relevant.

“Ineptocracy (in-ep-toc’-ra-cy) - a system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

“Malcolm Turnbull iterates importance of productivity and competitiveness”. I somewhat amused that an individual that has accrued (not produced) a fortune from a parasitic (non-productive) activity well in excess of his share of the productive pie would make such an iteration. I had a quick look at what all members’ House of Representatives occupations prior to parliament and found only 14 that had a productive background. Sounds like an Ineptocracy to me!

On the other hand we have the paradox of productive dairy farmers walking off their farms because they are unable to receive sufficient income for their produce from the dominant duopoly run by parasites.

A complex society requires some essential none productive services (e.g. Health, Education, Security, Justice (not law)) to function. We need to question the balance and degree of these activities and the reward (proportion of productivity) a particular activity attracts. While parasite activities attract more reward than productive ones, productivity will continue to decline along with competitiveness.”

The producers pay for discounts, no question

Consumer Prices in Australia are 65.11% higher than in United States

Consumer Prices Including Rent in Australia are 74.04% higher than in United States

Rent Prices in Australia are 94.88% higher than in United States

Restaurant Prices in Australia are 70.14% higher than in United States

Groceries Prices in Australia are 57.62% higher than in United States

Local Purchasing Power in Australia is 24.83% lower than in United States<<

Yes, and wages in Retail, hospitality and all low skilled workplaces are a fraction of ours.

So what can we expect.

Yabby, my understanding is that the milk prices paid to the farmers is a media stunt, in they they (Coles) say they have nit reduced the price they pay for PREMIUM milk.

What they don't tell you is that they now sell much less premium than they used to.

Belly, I have no idea what you are talking about, what 360 have I preformed.

I hold the exact same views as I did two years ago.

BW, I am buying another shop at the end of the year, it's in my blood.

*What they don't tell you is that they now sell much less premium than they used to*

Rehctub, what is premium about milk? Its a commodity.

*I want my goods at global rate*

In that case, Sonofgloin, your wages will have to be screwed back to a global rate too, as well as the price of your house

SOG know you should not enter a maths test with your boots on, you will need those fingers and toes.

Yabby>> In that case, Sonofgloin, your wages will have to be screwed back to a global rate too, as well as the price of your house<<

Just saying Yabby that Australia is a bloody expensive place to live, and “that” exploitation goes into the pockets of two, not the many. In Canada they dealt with mass merchants dominating the market by legislating that any discount that runs for longer than a week must be run in all stores nationally. This stopped “new” mass merchant outlets discounting for a year or so to run their existing small competitors out of business, then the prices go back to exorbitant normalcy. It worked, boutique shops came back to the malls.

Belly>> SOG know you should not enter a maths test with your boots on, you will need those fingers and toes.<<

I know I’m no mathematician, that is why I wear thongs for quick calculations…… my china

Yabby, you know what premium milk is, as discount milk is always home brand.

If the farmers are forced to sell most o ntheir premium at discounted prices, they go out of business.

This is the untold truth about discount milk. It's yet another scam.

that is why I wear thongs for quick calculations
sonofgloin,
and here I was thinking you were bedazzled by your boot laces.
Producer is dead-on with his assessment. That's why I am so much in favour of a flat Tax because a flat tax & only a flat tax can ever be considered a level playing field in economics. I believe it will happen in my time but those exploiting the "writing off" system now will never
admit that it actually would be the fairest of systems. It is the "write-off" tax system which allowed those whom Producer so aptly described in ineptocracy who will fight tooth & nail anything that's fair. The present system relies on deceit & only benefits a handful of greed mongers. Everyone pays the same rate, nothing can be more fair ! Same with income Tax bracketing. Ged rid of it ! Earn a Dollar & pay so much % Tax for every other Dollar !
If Business thinks it can't be done, prove it !

*Just saying Yabby that Australia is a bloody expensive place to live, and “that” exploitation goes into the pockets of two, not the many*

I don't think so, Sonofgloin. Australians spend just 10% of their income on food. They get a bargain really. Plenty left to throw billions down the pokies and overpay for Sydney houses. Now if you were Indonesian, you'd spend 44% on food. Profits from Coles and Woolies go to nearly all Australians, as nearly all have super funds and hundreds of thousands of mums and dads own shares direclty. They are called Grey Nomads.

Rehctub. farmers get exactly the same for their milk wether its sold as home brand or fancy label brand. Coles did not drop the amount paid to processors, when it dropped the price of milk. But only a quarter of all milk goes for drinking, a great deal of it is exported as milk powder or cheese. Extra costs, like the carbon tax have affected the dairy industry in particular. Don't blame Coles for that.

Well that's not my understanding Yabby, so I will try to find out more.

Yabby>> I don't think so, Sonofgloin. Australians spend just 10% of their income on food. They get a bargain really.<<

Yabbt that statement is absolute rubbish. If a pleb brings home $600 in the hand, they spend no more than $60 on food...for a week...rubbish.

http://wsm.wsu.edu/researcher/WSMaug11_billions.pdf

There you go, Sonofgloin, some interesting figures on that global comparison table. Perhaps in countries like Australia and America, food is too cheap, so people are too fat.

http://www.businessspectator.com.au/bs.nsf/Article/Dont-blame-Coles-for-our-woes-farmers-pd20130218-52R6P?OpenDocument&src=rab

There you go, Rehctub. Its a complicated argument, but even the head of the dairy farmers agrees with me about the Coles issue.

Yabby, you say....Perhaps in countries like Australia and America, food is too cheap, so people are too fat.

Well that's half right, as the main problem with food is that processed food is cheaper than fresh, and that's as a result of manipulation of the system by the food super powers.

But I have to agree with S, as there is no way Australians only spend 10% of their incomes on food.

While that may be a sastistic, it is simply not possible.

More than likely the stats are from the same people who provide us with employment numbers.

I think its quite possible, Rehctub, as its food. That does not mean toilet paper, shampoo, cleaning products and all the rest.

It probably depends how pedantic you are being in what you call food.

An example of a water saving shower I used to sell.

It retailed for $27. It cost me $2.00 to make. However it also cost $4.00 to put in a packet, another $4.00 to sell & invoice, & account for, & $6.00 average to deliver to the retailer, [$400 in Qld, & $16.00 in WA].

How much did the buyer pay for the shower, & how much for the packaging, distribution & other add ons?

I would hazard a guess that only about 10% of the bill at the checkout is actually for the food, & the rest is for the glitz that induced the customer to buy it.

When I look at my receipt from the super market only about $35 in $100 is food, & its packaging. The rest is pet stuff, kitchen, laundry & bathroom consumables, clothing, confectionary, gardening supplies, & pesticides. Not much human food at all.

As I would have to drive another 40Km to use their fuel voucher, & I don't like stale bread or old/frozen milk, I don't see much discount anyway.

There you go Yabby.....

Stopped to get a "take away" burger today, cost $5.

On $600 in the hand (and a load of lower echelon plebs are on that) and a budget of $60 being the 10% on food, I could buy two burgers a day, but go without on Sunday.

Just admit it is a rubbish argument Yabby and we can all go home.

Yabby you regularly bleat on about how Aussies shove their money in the pokies and waste it on booze. I have said this before, who voted you dictator.

Sonofgloin, I'm with Yabby about how much is wasted on the likes of the pokies etc.

In a perfect world, these wasted dollars would be spare money, but in reality, much of the waste was intended to put food on the table, so too many kids go without.

Sonofgloin, failure of figures remains your fatal flaw it seems.

Nobody in any survey on food costs, includes the cost of a restaurant cooking it for you. Next, the average Australian wage is around 50 Grand a year or more. If you can't cook your own food for 5000$ a year, then you are living it up. Nothing wrong with that, but as a food comparison, the ingredients which they would compare, would not be luxury foods but everyday food.

Yabby said;
Nobody in any survey on food costs, includes the cost of a restaurant cooking it for you.

Well actually, under the latest economic figuring of cost of living
they do just that. It has a value to you so it is taken into account.

You might have seen my comment about a paper I am studying and that
sort of thing is counted in one part. I will write it up soon.