Cadbury boss defends supermarkets against price gouging allegations

What people overlook is that the cost of putting fruit and vegetables on shelves is influenced by many costs other than what the farmer is paid:  Broadly, distribution costs, including transport costs.  And the supermarket staff have to be paid

The local boss of one of the world’s largest supermarket suppliers, Cadbury owner Mondelez, has dismissed claims Woolworths and Coles are price gouging shoppers, arguing much of the negative commentary engulfing the chains was based on “emotion” with no evidence of an uncompetitive or dysfunctional supermarket sector in Australia.

Amid a growing political firestorm that has seen six separate inquiries launched to inspect the supermarket industry, including a Senate inquiry pushed by the Greens into pricing and market power, Mondelez Australia chief executive Darren O’Brien said competition was as intense as it has been for a decade, and shoppers were treated to a wealth of choice.

“I don’t see evidence of what I would consider (price) gouging. I don’t know how you measure gouging,” Mr O’Brien told The Weekend Australian.

“Comments around there not being competition, comments around things needing to be broken up, I think these are comments that are made without people putting forward evidence.

“What is the evidence of dysfunction? I’ve seen a lot of emotion. I haven’t seen a lot of evidence presented. I’m not seeing a lot of evidence that there is a dysfunction in the market.”

The comments from the Mondelez CEO are all the more powerful given he is also chair of the Australian Food and Grocery Council, the peak body for the ­nation’s $150bn food manufacturing sector.

Supermarket giants Woolworths and Coles have faced a political pile-on over the last few months as the cost-of-living crisis and the Albanese government’s unpopularity – driven by a sense the government was not focused enough on household financial stress – has seen the chains and perceptions of their misuse of market power put under the spotlight.

But Mr O’Brien, whose portfolio of brands includes Cadbury, Toblerone, Ritz crackers and Philadelphia cream cheese, warned against intervention, such as breaking up Woolworths and Coles, saying the competitive landscape was bolstered by their efficient operations.

He said the inquiries in train, ranging from a Senate probe into pricing, an inquiry called by the government to be run by the Australian Competition and Consumer Commission, and another inquiry commissioned by the ACTU, needed to be accompanied by balance and the facts.

But they would also probably come up with the same conclusions other inquiries had found, that the Australian supermarket sector was highly competitive.

“There seems to be a lot of inquiries going on,” Mr O’Brien said. “We will have to see what those findings are. From what I’ve read, some of these inquiries have been held in the past and the outcomes of those found similar to what I’ve said, that we have a well functioning and competitive retail environment in this country.

“Having inquiries per se is not necessarily a bad thing, but I do think the commentary around them needs to be balanced. And I certainly have not agreed with a number of things that I’ve read because I think they’re factually incorrect. Perhaps an inquiry will help to put some factual information on the table that people can look at with a balanced view.”

Mr O’Brien conceded that the supermarket industry could be viewed as concentrated, and that at times Mondelez has had “robust” interactions with the major chains, but competition between Woolworths, Coles, the independents and new entrants like Aldi and Costco ensured a highly competitive market for shoppers.

“We have enjoyed a constructive and at times quite robust relationship or interactions with our retail partners, but they are a critical part of our ability to get products that people want to enjoy in locations that they want to be able to get them from,” he said.

“There’s some 2500 or more supermarkets out there spread right across Australia. They are critical partners to us. And at times, we may have robust commercial negotiations, but overall our ability to work with them … is strong.

“Even though it is a concentrated retail market in Australia, it’s a very competitive one. And consumers have choice. And if they don’t like particular prices or promotions at one supermarket, they have significant choices to go to others, whether they be discounters or direct competitors of one or the other supermarkets or an independent. That is proven to be a dynamic environment for consumers. And it’s one that I think works quite well.”

Some of the criticisms over the supermarkets first emerged late last year, when farmgate prices for key products such as lamb and beef began to fall sharply but there was no proportionate fall in meat prices on the shelves.

Mr O’Brien said those criticising the supermarkets needed to be mindful of the complexities of supply deals, contracts and the costs involved in getting products from the farmgate to the shelves.

“If you have a look over the last 10 years or so, consumers have certainly seen the benefit of that intense competition between the various retailers,” he said. “And I certainly haven’t had a sense that competition has changed in any way in the last 10 years.”

https://www.theaustralian.com.au/business/retail/cadbury-boss-defends-supermarkets-against-price-gouging-allegations/news-story/85de3968c45cc5eb8a328bc044667b48

**************************************************