Lion boss pushes for a better deal for suppliers
In the midst of protracted and sometimes heated negotiations between supermarkets and suppliers to forge a voluntary code of conduct, Mr Irvine said it was time for the supermarkets to pass on earnings gained from greater supply efficiencies to grocery brand owners such as Lion.
"I think there are a lot of efficiencies that retailers and suppliers can make in the supply chain," he said. "And what's important is that we get to a point where we share what those efficiencies are in a win-win way. Some of those efficiencies we can do can cost us more but give a benefit elsewhere in the supply chain and that has to be recognised.
"When you get to those opportunities, you have to have a belief that your partners will share with you in what those benefits are. If you have got a collaborative, constructive relationship, you can do that."
Mr Irvine, who was appointed Lion CEO in January and is the former CEO of Nestle Russia and Eurasia, is one of the few suppliers to carry some weight with Coles and Woolworths. He sits atop a food empire controlled by Japanese conglomerate Kirin that has a sprawling portfolio, selling milk under brands such as Big M and Pura, a range of dairy foods such as Yoplait and beers such as XXXX, Tooheys and James Boag. But he also warned some frank discussions would have to take place.
"That's just the nature of the world and that happens here, in Europe and Russia, Germany, France, the UK and wherever I have worked," he said.
His arrival in Australia comes as Coles and Woolworths put a blowtorch to all suppliers to slash their costs and accept steep discounts and slashed margins.
Mr Irvine, who comes from Britain, where four large supermarkets control the industry, said he was aware of the highly centralised nature of Australia's market.
"It is a concentrated market, compared to what I'm use to," he said. "It means that we have to work harder in collaboration with those retailers."
He said he supported negotiations between suppliers and the supermarkets to develop a voluntary code of conduct to govern their relationships.
He said he had growth strategies for Lion, to help lessen its exposure to the Australian market and the recent loss of milk contracts with Coles, which would include an eventual launch into Asia.
Frequently Asked Questions about this Article…
Stuart Irvine urged Australia’s supermarket duopoly, Coles and Woolworths, to share some of the gains from cost-cutting and improved supply‑chain efficiencies with suppliers. He called for an end to the combative relationship and wants retailers and suppliers to share benefits in a ‘win‑win’ way.
The article explains that Australia’s grocery market is highly concentrated, meaning a few big supermarkets have significant buying power. Coles and Woolworths have pressed suppliers to slash costs, accept steep discounts and lower margins, which puts pressure on food manufacturers and other suppliers.
Negotiations are underway to develop a voluntary code of conduct to govern supermarket–supplier relationships. Stuart Irvine said he supports those negotiations and believes a constructive, collaborative code could help resolve tensions and ensure fairer sharing of supply‑chain benefits.
Irvine said retailers and suppliers can find efficiencies in the supply chain that reduce overall costs. While some efficiency measures may cost one party more, they can deliver benefits elsewhere in the chain. The key, he argued, is trusting partners to share those benefits so both sides gain.
Stuart Irvine was appointed Lion CEO in January and is the former CEO of Nestlé Russia and Eurasia. His international experience and leadership of a major food group owned by Japanese conglomerate Kirin give him credibility in negotiations with large Australian retailers.
The article notes Lion’s wide portfolio, including milk brands such as Big M and Pura, dairy foods like Yoplait, and beers including XXXX, Tooheys and James Boag. These are examples of the grocery and beverage categories Lion supplies to major retailers.
According to the article, Lion has growth strategies designed to reduce its exposure to the Australian market following the loss of milk contracts with Coles. Those strategies would include an eventual launch into Asia as part of diversifying revenues.
Everyday investors should note that margin pressure from dominant retailers is a real risk for suppliers, but efforts to create a voluntary code and share supply‑chain efficiencies could improve outcomes. Lion’s management is pursuing diversification and regional growth (including plans for Asia) to lessen reliance on the concentrated Australian grocery market.
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