Lion boss pushes for better deal
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.
Frequently Asked Questions about this Article…
Stuart Irvine was appointed boss of Lion in January and is a former CEO of Nestlé Russia and Eurasia. He’s in the headlines for urging Australia’s supermarket duopoly — Coles and Woolworths — to share gains from supply‑chain efficiencies with suppliers and for pushing for calmer, more collaborative retailer‑supplier relationships.
Mr Irvine called on Coles and Woolworths to pass on some of the earnings they gain from greater supply‑chain efficiencies to grocery brand owners. He said suppliers and retailers should work together in a ‘win‑win’ way so efficiency benefits are shared across the chain.
The article says Coles and Woolworths have been putting intense pressure on suppliers to slash costs, accept steep discounts and reduced margins. This pressure has already led to commercial friction and, for example, Lion recently lost milk contracts with Coles.
The piece describes ongoing, sometimes heated negotiations between supermarkets and suppliers to create a voluntary code of conduct to govern their relationships. Mr Irvine said he supports those negotiations as a way to improve collaboration and reduce combative dealings.
According to Mr Irvine, Lion is not threatened by the proliferation of cheaper private‑label products. He accepts private‑label has a place on shelves but says branded products remain important to supermarket profitability and appeal to consumers looking for innovation.
Mr Irvine outlined longer‑term plans to reduce Lion’s exposure to the Australian market, including an eventual launch into Asia to find new markets. He said these plans could involve acquisitions as part of a multi‑year strategy.
Lion is part of a food empire controlled by Japanese conglomerate Kirin. The article lists Lion’s products and brands including milk brands Big M and Pura, dairy foods such as Yoplait, and beers like XXXX, Tooheys and James Boag.
Investors should watch progress on the voluntary code of conduct between supermarkets and suppliers, any public updates on commercial negotiations with Coles and Woolworths, Lion’s execution of its growth strategy (including moves into Asia or acquisitions), and how contract changes—such as lost milk supply deals—affect Lion’s revenue and margins.
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