Coles puts heat on suppliers in new line call
Documents obtained by Fairfax Media reveal Coles sent a tender request to suppliers just before the Easter long weekend, giving them barely two weeks to present potential new products to the review, including offerings for its private-label range.
Categories up for review include weight management products, sports nutrition, Coles' "good for you" health food range, and its "free from" range, that includes gluten-free products.
"Our intention is to expand and develop our presence in these areas," Coles said in a message to suppliers late last week.
Suppliers must present their new product proposals by Monday, April 15, with meetings to be held over the duration of that week. Coles intends to have the new product range in its stores by September.
According to the message, suppliers must indicate "what products will be submitted as exclusive to Coles" and existing suppliers have been told to nominate a "proposed list of deletions" from Coles' shelves.
The suppliers must cover the cost of any product lines that end up being deleted by Coles, and compensate Coles for these deletions so the supermarket is not out of pocket.
Other conditions include a 7.5 per cent introductory rebate to Coles for the first 13 weeks - on top of a minimum shelf profit margin of 46 per cent - and confirmation that there will be no cost increases on new lines for two years.
New product lines that do not meet sales projections can be deleted at Coles' discretion within 13 weeks of introduction.
A Coles spokesman said the category review looked at both branded and private-label products and could lead to Coles-brand products being cut.
"This is not about private label versus brands," he said.
According to Coles, it has always been made clear to suppliers that terms are negotiable.
"Coles works hard to ensure that we treat our suppliers with respect and that our negotiations are fair and reasonable," the spokesman said.
The news comes as the Australian Competition and Consumer Commission continues its investigation of the big supermarkets over their arrangements with suppliers.
In February, ACCC chairman Rod Sims told a Senate estimates committee that investigations had raised issues about whether the big supermarkets were engaging in unconscionable conduct in their dealings with suppliers and misusing their market power by discriminating in favour of their house-brand products.
Frequently Asked Questions about this Article…
Coles launched a category review of its health and nutrition ranges — including weight management, sports nutrition, its "good for you" health foods and the "free from" (gluten‑free) range — to expand and develop its presence in these areas. Coles says the review looks at both branded and private‑label products.
Coles sent a tender request to suppliers just before the Easter long weekend, giving them barely two weeks to submit new product proposals. Suppliers were asked to present proposals by Monday, April 15, with meetings held that week, and Coles planned to have the new product range in stores by September.
Yes. Suppliers must indicate which products will be submitted as exclusive to Coles and existing suppliers were asked to nominate a proposed list of deletions from Coles' shelves as part of the review process.
Conditions in the tender included a 7.5% introductory rebate to Coles for the first 13 weeks, a minimum shelf profit margin of 46%, and confirmation that there will be no cost increases on new lines for two years. Suppliers must also cover the cost of any product lines that Coles deletes and compensate Coles so the supermarket is not out of pocket.
Yes. Coles can delete new product lines at its discretion within 13 weeks of introduction if those lines do not meet sales projections.
Coles has denied the review is designed to squeeze branded products off shelves in favour of private‑label replacements. A Coles spokesman said the review considers both branded and private‑label products and that it is "not about private label versus brands," although he acknowledged Coles‑brand products could also be cut.
The Australian Competition and Consumer Commission (ACCC) is investigating the big supermarkets' arrangements with suppliers. ACCC chairman Rod Sims has said investigations raised issues about potential unconscionable conduct and whether supermarkets were misusing market power by discriminating in favour of their house‑brand products.
Investors may want to monitor the outcome of the review (changes to Coles' product mix, exclusive deals or deletions), any impact on supplier revenues, and developments in the ACCC investigation into supermarket‑supplier arrangements — all of which were highlighted in the article as linked to this review.
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