Coke boss returns fire after spat with Coles over costs
Coca-Cola Amatil boss Terry Davis came out swinging against claims from major supermarkets that suppliers such as Coke are ripping off consumers with the prices they charge locally.
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 concerted campaign in the lead-up to negotiations with the representative body for grocery suppliers - the Australian Food and Grocery Council - to develop a voluntary code of conduct to curb the power of the supermarkets.
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 told reporters on Tuesday.
He said that while some of its costs, such as aluminium and sugar, are the same globally, CCA in Australia pays "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."
He said the same applies for Coles, including the higher rent it pays for Westfield shopping centres. Mr Davis said there is no consumer goods business in Australia that has invested more in reducing its 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 both 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."
Despite the strong words, he said that talk of a falling out between Coles and CCA have been overstated. " I think it's been blown out of proportion," Mr Davis said.
"We would believe our relationship with Coles is very, very strong. In fact, I'm not sure that it's ever been stronger.
"[Mr McLeod] is absolutely entitled to his point of view. My point of view is that labour cost in Australia is demonstrably higher than what it is in Asian countries, and yes, of course it will be cheaper in Asia ... just as a whole range of goods and services are."