Coke boss lashes out over rip-off claims
Coles boss Ian McLeod recently accused CCA of charging local consumers up to three times what Indonesians pay for equivalent products.
It follows similar allegations from Woolworths in what appears to be a campaign in the lead-up to talks with the representative body for grocery suppliers - the Australian Food and Grocery Council - to develop a voluntary code of conduct to curb the supermarkets' power.
The message from Mr Davis was simple. We don't pay Australian workers $1.50 an hour, and neither do you. "Do we actually want to pay our workers $1.50 and $2.50 an hour? Of course they are cheaper in Indonesia," Mr Davis said.
He said that while some of its costs, such as aluminium and sugar, were the same globally, CCA in Australia paid "15 to 20 times per hour more for labour, and we pay significantly more for rent, and we pay significantly more to have a social security backdrop which doesn't happen in many of these other countries".
Mr Davis said there was no consumer goods business in Australia that had invested more in reducing costs than CCA.
"And if that's not good enough well I'm not sure what happens to the rest of Australian industry because it's a very dour outlook if that's the case," he said.
The issue of imports versus local production is a sensitive point for CCA, which was forced to downgrade earnings on Tuesday, in part due to its packaged fruit business, SPC Ardmona, which has continued to see earnings decline against cheap imports used in supermarket private-label products.
CCA said SPC Ardmona has lost half of its local market share to these imports over the past five years.
Mr Davis said the company remains committed to local manufacture for SPC Ardmona and its core beverage business.
"Yes I can bring in [Coke] cans from Indonesia cheaper than I could produce them in Australia," Mr Davis said. "I am not going to do that because I am fervently a believer that we have to have a manufacturing industry in this country because if we don't, we do it at our peril."
He said talk of a falling out between Coles and CCA, one of the most powerful global brands the supermarket deals with, has been overstated. "We would believe our relationship with Coles is very very strong, in fact I'm not sure that it's ever been stronger," he said.
Frequently Asked Questions about this Article…
Terry Davis rejected accusations from major supermarkets that CCA charges Australian consumers far more than people pay overseas. He pointed to much higher Australian labour costs, rent and social security compared with countries like Indonesia, and said some input costs (eg. aluminium, sugar) are global but labour in Australia can be 15–20 times more per hour.
Coles boss Ian McLeod alleged that CCA was charging local consumers up to three times what Indonesians pay for equivalent products. That claim was part of a broader public debate between supermarkets and suppliers ahead of talks on a voluntary code of conduct.
CCA says price differences are largely explained by higher domestic costs — notably much higher labour rates, greater rent and the cost of maintaining a social security backdrop — even though some raw materials such as aluminium and sugar are priced similarly around the world.
Yes. The company was forced to downgrade earnings in part because SPC Ardmona’s packaged fruit business has seen declining earnings as it loses share to cheaper imports used in supermarket private‑label products.
CCA said SPC Ardmona has lost about half of its local market share to imports over the past five years, which has contributed to weaker earnings in that business.
Terry Davis acknowledged he could import Coke cans cheaper from Indonesia, but said he will not. He stated a firm commitment to maintaining local manufacturing because he believes Australia needs a domestic manufacturing industry.
Allegations from Coles and Woolworths appear timed ahead of talks with the representative body for grocery suppliers — the Australian Food and Grocery Council — to develop a voluntary code of conduct aimed at curbing supermarket market power. The public claims form part of that wider negotiation context.
From the article: investors should note CCA has publicly defended its pricing, highlighted higher Australian operating costs, and disclosed an earnings downgrade tied to SPC Ardmona losing share to imports. Management also says its supplier relationship with Coles remains strong. These points suggest investors watch margins, the impact of cheap imports and private‑label competition, and any outcomes from code‑of‑conduct talks.
Call 1300 880 160
Start a chat
Schedule a call
