Coles defends its supplier squeeze
"What should we do?" he asked. "Challenge it, or turn a blind eye?"
The key to Coles' turnaround over the past five years has been to hold prices down, Mr McLeod told a business lunch on Tuesday.
"When Coles keeps prices down, competition, affordability, ethical sourcing, community support, farm sales, food manufacturing, jobs and job security all go up. We think that is a good thing, so we're going to keep on doing it," he said.
"It's all about affordable food for our customers and helping Australia grow ... It means challenging the status quo, and sometimes challenging suppliers where we believe Australians deserve a better deal.
"Many of [our multinational suppliers] are bigger than Coles and make far larger profit margins. Prices are higher than overseas and that's why we challenge it. These examples include products made overseas and sold overseas at lower retail prices, much lower.
"It also includes examples of products made in Australia but still sold cheaper overseas."
Mr McLeod said Coles had worked increasingly with suppliers to boost products sourced locally, which included lending to some suppliers to help them upgrade their businesses - for example, to milk processors.
"Politicians that attack Coles should remember that 18 million [Coles] customers support lower prices - and they vote," he said. .
"Coles is in the business of keeping the cost of living down, so it is more than a little frustrating when some politicians criticise us for doing just that."
Australian consumers were among the least loyal customers in the world, he said. At the same time, new competitors such as Aldi, which had about 300 outlets, was planning to double its presence within a decade, which would give it the same number of outlets as Coles, after a century of investment, Mr McLeod said.
Frequently Asked Questions about this Article…
Coles' supplier squeeze refers to the supermarket challenging supplier pricing and margins. Coles boss Ian McLeod says the company defends the practice because some multinational suppliers earn larger profit margins and sell products cheaper overseas, so Coles pushes back to keep prices down for Australian customers.
Holding prices down has been a key part of Coles' turnaround over the past five years. Coles says lower prices boost competition and affordability and support ethical sourcing, community programs, farm sales, food manufacturing, jobs and job security.
Yes. Ian McLeod told a business event that many multinational suppliers are bigger than Coles and make far larger profit margins, which is one reason Coles challenges pricing practices.
According to Coles, there are examples where products made in Australia are still sold cheaper overseas. The company also pointed to items made overseas that are sold abroad at much lower retail prices than in Australia.
Coles says it has worked increasingly with suppliers to boost locally sourced products and has even provided lending to some suppliers to help them upgrade operations, with milk processors given as a specific example.
Ian McLeod responded that politicians should remember Coles serves about 18 million customers who support lower prices and vote. He said Coles is focused on keeping the cost of living down and finds some political criticism frustrating.
Coles highlights a competitive retail environment: Australian consumers are described as among the least loyal, and Aldi — with about 300 outlets at the time — plans to double its presence within a decade, increasing pressure on established supermarkets to keep prices competitive.
Everyday investors should note that Coles publicly frames supplier negotiations as part of a broader strategy to reduce prices for customers, support local sourcing and protect jobs. The company emphasizes challenging the status quo when it believes Australians deserve a better deal.
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