Lion boss pushes for better deal
Lion boss Stuart Irvine has called on the nation's supermarket duopoly to share with suppliers some of the proceeds from their relentless attack on costs, arguing for an end to the combative relationship between Coles, Woolworths and food manufacturers.
In the midst of protracted and sometimes heated negotiations between supermarkets and suppliers to forge a voluntary code of conduct, the recently appointed Mr Irvine said it was time for the supermarket giants 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," Mr Irvine told BusinessDay.
"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 the boss of Lion 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 including Yoplait, and beers such as XXXX, Tooheys and James Boag.
But he also warned frank discussions would have to take place.
"All of us are going to have interesting commercial discussions as we go forward, 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."
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.
Coming from Britain where four large supermarkets control the industry, Mr Irvine said he was aware of the highly centralised nature of Australia's grocery market.
"It is a concentrated market, compared to what I'm used to. It means that we have to work harder in collaboration with those retailers."
Mr Irvine said he was not threatened by the proliferation of cheaper, private-label groceries stealing market share from his brands, and believed private-label products had their place on shelves. But he said branded products were also crucial to the profitability of supermarkets, with consumers keen to purchase innovative items.
He said he supported negotiations between suppliers and the supermarkets to develop a voluntary code of conduct to govern their relationships. He also said he had a number of growth strategies for Lion to help lessen its exposure to the local market and the recent loss of milk contracts with Coles, which would include an eventual launch into Asia where he will seek new markets.
This was a long-term plan that could involve acquisitions.