Coles puts heat on suppliers in product review
Coles has denied that a major review of its health and nutrition product offerings is designed to squeeze branded products off its shelves in favour of private-label replacements.
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.