OZ grocery price war hits chicken values

A price war between Australia’s two major supermarkets, which has been forcing prices down on staples, has now moved onto chicken meat with farmers saying businesses will be in jeopardy as they will unable to pass on increased costs to consumers in the future.

In recent months food products such as milk, butter, cereal and free-range eggs have been the target of the two dominant retailers, Coles and Woolworths, which together own 75% of Australia’s grocery and liquor market.

On Monday Coles announced chicken meat would be the latest product added to the list of foods covered by its “Down Down” campaign, with chief executive Ian McLeod saying more price cuts are in the offing.

Farmers groups have met the announcement with shock saying in the end these cuts would damage the whole market.

“Coles states that it will absorb the cost but this is not likely to continue indefinitely and therefore such a price decrease is clearly going to put pressure on all of those in the supply chain from processors to farmers and small retailers,” executive director of the Chicken Meat Federation Andreas Dubbs told ABC Radio.

Egg producers have also fought against the price decreases of up to 20% free-range eggs.

Speaking to The Australian newspaper egg farmer Brian Ahmed, who converted from free-range to cage to supply cheap eggs to supermarkets labelled the price drop as unsustainable.

“It’s not a high-profit industry. There’s not that much room to move, and the scary part is costs are going up because of the cost of grain. If that 18 per cent [cut] is passed on to farmers, which is what we’re afraid of, then that would be not sustainable.” Said Mr Ahmed.

The Australian upper house of parliament, the Senate, is conducting an inquiry into the ongoing milk price war which has, since it started in February, been widened to include a variety of other staples.

Experts speaking at the inquiry have said long-life milk may replace fresh milk in supermarkets if the price war continues.

“Fresh milk may become a luxury item. I don’t believe that Coles and Woolworths would lose any sleep if they substituted long-life UHT milk for fresh milk. In some countries in Europe that’s what’s happened,” said University of New South Wales School of Business’s Professor Frank Zumbo, the Australian Associated Press reported.

Last week Fosters halted shipments of beer to Coles and Woolworths supermarkets under a rarely used section of the Trade Practices Act after it found out they were to be sold at up to $10 below the regular retail price.

Coles management will give evidence before the committee this week.

Price markdowns:

<•>Milk from $2.09 (£1.34) to $2 (£1.28) <•>Beer from $38 (£24.40) per 24 pack to $28 (£17.98) <•>Eggs from $4.89 (£3.14) per dozen eggs $4.00 (£2.57)


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