Terry Davis, group managing director at CCA, said at annual shareholders meeting this week that trading conditions for Australian food manufacturers continued to be difficult as they battled against the high Australian dollar and a flood of cheap, lower-quality private-label imports by the major retailers.
CCA, which also owns the SPC Ardmona fruit and vegetable processing business, was being impacted by these variables and like other food manufacturers was unable to compete on costs with imports, he said.
“Many of these [imports] come from countries that do not have the same stringent quality standards or the same favourable labour conditions as Australia. The flow-on effect to local communities and regional employment is devastating,” he added.
Make a choice, says CCA
“My personal view is that ultimately Australian consumers and in turn major Australian retailers will have to make a choice. Lift their support for domestically-produced brands, or support imported private-label products and face the consequence of having a diminished Australian food industry.”
Giving an example of his firm’s quandry, Davis pointed out that SPC Ardmona was committed to sourcing its fruit locally wherever possible, but this had come at a cost, and the food business was smaller than it was five years ago.
Davis also said that CCA is lobbying with the government to review investment allowance incentives for Australian manufacturers to help level the playing field against imported products.
The customers had decided, says Coles
But only a day later, supermarket giant Coles told a Senate inquiry yesterday that they were not trying to increase sales on cheaper imported private label products at the expense of branded competitors.
John Durkan, merchandise director for Coles, told the Senate inquiry into Australia’s Food Processing sector that sales for home brand products had grown strongly over the past four years.
Durkan pointed out that “customer choice” was behind the popularity of home brands rather than a deliberate strategy by Coles to increase sales margins by acting as both a retailer and producer.
“We have seen claims that supermarkets are actively deleting branded products to replace them with private label brands. That is simply not the case in Coles’ supermarkets,” he said.
“Branded products continue to represent over 75 % of overall sales in Coles, and our strong view is that customers will ultimately decide what level of private label products they will buy,” he added.
“Shelf space ranging decisions are made on the basis of sophisticated customer preference modelling, not on any strategy to replace branded products with private label,” he said.
We are still local
Durkan denied that private label products are increasingly being sourced from cheaper overseas suppliers and pointed out that its local private label contracts helped create almost 10,000 new jobs in the Australia in the last 4 years.
“Again, the facts do not support the claims. Nearly 100% of our fresh produce is grown in Australia, and nearly 90% of our private label grocery products are made in Australia, and we are committed to keeping it that way,” Durkan said.