Coles defends its supplier squeeze
Coles boss Ian McLeod has launched a spirited defence of its tactics to squeeze its suppliers, arguing that some enjoy higher profit margins than the supermarket chain does while selling Australian goods more cheaply abroad than they make available locally.
"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.