Caging the 900 pound gorilla

Everyone who reads my blog (including Coles) knows that since milk went down, down, down to $1 per litre at Coles I have done a lot of Coles bashing. After 30 years in the very switched on world of retail pharmacy I am well aware that it is not smart business to bash your customer and with 80% market share the Australian supermarket duopoly are indeed a very important retail customer in the farm to glass story.

So why have I chosen to ignore this wise advice. It was Mick Keogh of the Australian Farm Institute who first introduced the term, “900 pound gorilla”, in reference to the dominance of the two major supermarket chains.

Furthering the analogy, he said for farmers, dealing with the supermarkets was like being hugged by a gorilla; the initial embrace may be warm and comforting but over time the oxygen gets squeezed out. GorillaHug

That’s just how I feel like my life blood is being squeezed out. Like most dairy farmers I feel helpless, undervalued and in the current climate of relentless supermarket discounting of milk it’s so hard to feel positive about the future for NSW and Queensland dairy farmers and indeed the ongoing availability of fresh milk in both of these states

Should I be feeling this way?

Yesterday one of the speakers at the Dairy Innovators Forum in Queensland said if we have 134,000 farms in Australia we have 134,000 CEO’s and 134,000 CFO’s and its time we got together and found our inner strength and found out just how powerful we could be if we all worked together.

So what’s stopping us I keep asking myself?  Highly frustrating to me the Australian dairy industry just seems to be sitting in a rowing boat waiting for the wind to change in its favour rather than determining the place they want to be and buying the biggest and most powerful motor to take us there.

So is the ACCC announcement that they are launching an investigation into Coles and Woolworths over possible misuse of their market power and “unconscionable conduct”  going to help save the dairy farmers? Is the ACCC a toothless tiger no more? Will they cage the 900 pound gorilla?

Let’s have a look at some of what Mick Keogh for the Australian Farm Institute has to say on this announcement here

The recent announcement by ACCC head Rod Sims of the supermarket investigation gained wide publicity (see here, here and here ).  The response from the major supermarkets has been tinged with surprise and indignation (see here and here ).

When both major Australian supermarkets are listed amongst the largest retailers in the world despite Australia’s relatively small population, it gets a bit hard to argue that their market share is actually less than everyone thinks!

Unfortunately for the major retailers, however, their responses to the ACCC announcement directly contradict their own actions and advertising, so are unlikely to garner much public support or sympathy.

By demonstrating the reality of their market power through, for example, unilaterally declaring that from now on the price of a major staple such as milk will be $1 per litre or the price of bread will be $1 per loaf the major retailers have sent a very clear message to consumers that they have the power to set the price of goods they retail, even though it is clear that the major retailers don’t actually produce those goods.

Complex explanations that the retailers have funded these price cuts from their own businesses and not as a result of lower prices being paid to suppliers simply don’t sound believable in the face of evidence that dairy farmers are leaving the industry and dairy processors are reporting major operating losses while supermarkets report major increases in profits.

No amount of slick advertising based on images of retailers and their moleskin and Akubra-clad celebrity spokespersons standing arm in arm with smiling farmers will be sufficient to contradict the raw display of market power that is repeatedly demonstrated to consumers every week, when they pick up their $1 a litre milk or the $1 loaf of bread.

It doesn’t take a great deal of thought before consumers make the connection between the extent of the market power that major retailers have demonstrated, and the potential to misuse that market power unless there is adequate regulation and transparency. When reports emerge from the ACCC that 50 suppliers have come forward with complaints this hardly comes as a great surprise to consumers.

Ultimately, the major retailers have promoted their market power as a major benefit for consumers, so to then try and claim that in fact they don’t have that power, and even if they did have it they would never misuse it is simply not likely to pass the “smell test” in the court of public opinion.

The Conversation also had some very interesting commentary here and here. Let me share some of what resonated with me

The Australian Competition and Consumer Commission (ACCC) announced last week that it is investigating claims that Coles and Woolworths are bullying suppliers. The issue is serious, but the ACCC investigation only treats the symptom and diverts attention away from the real cause of the problem: supermarket power.

That’s right this is all about power and it’s time for the dairy farmers to use their power and get serious and smart about how we deal with the supermarkets. The good news it is starting to happen. Tomorrow’s post will share with you some of what is happening in NSW

In the meantime check this out from clever young full-time vet student and part- time dairy farmer Cassie MacDonald. Cassie has created her own infographic to counter the half truths in the Coles version. Cassie says “Coles it’s clear you don’t give a buck” The video is averaging 1500 views and it’s pretty impressive

 

Update: Cassie Macdonald has not had 50% more hits on her video in 3 days than Coles have in 2 months

Cassie Macdonald update