Date: May 28 2012
THE supermarket giants Coles and Woolworths are relying on cheap labour in countries such as South Africa and Thailand to deliver their burgeoning home brand lines at the lowest prices.
A Fairfax investigation has found Coles and Woolworths issue global tenders to produce their home brand or "private label" products such as frozen berries, oils, rice, pasta sauces, canned spaghetti and tinned tuna, fruit and vegetables. One in every four grocery items sold here is a supermarket brand product.
The contracts are often filled by large overseas processors specialising in providing private label goods for Europe and North America. This means the same can of diced peaches can be found on supermarkets shelves in New York, London and Sydney, just with a different label.
In research yet to be published, the Australian National University followed the supply chain of the supermarkets' private label business and ended up in South Africa's fruit processing factories and Thailand's canned pineapple industry. The factories are globally seen as premium producers and support thousands of farmers.
"One of the canneries made private label products for over 100 supermarkets," said researcher Libby Hattersley, who inspected the South African businesses. "They just slap the retailers' label on it and send it out to them."
Coles and Woolworths say their preference is to source private label products from Australia. But processed food is increasingly sourced from Canada, New Zealand, the US, Malaysia, Argentina, Greece, Thailand, South Africa, China, France, Belgium, Peru and Swaziland.
The supermarkets said they came to rely more heavily on imports when local crops failed during the drought and floods. Added to this, the strong dollar and cheap labour delivered what Woolworths recently described as ''significantly greater'' premiums.
Despite the end of the drought and floods, many of these contracts are still in place.
One in two of the Woolworths Select brand products is now imported, while its premium brand, Macro, carries 85 per cent Australian products. Coles says 90 per cent of its home brand sales are from Australian-made products, but this is a figure skewed by sales of home brand milk, eggs and bread. Coles refuses to release a figure on the percentage of home brand lines that are sourced overseas.
An industry source familiar with Coles said the company imported 1200 of its private label lines, roughly a third of its own brand offering.
Coles recently struck a deal with Simplot, the only Australian-based processor of frozen vegetables left, to supply its home brand vegetables.
Senators running the food processing inquiry said many people in the food industry declined to speak publicly, fearing reprisal from the big two supermarkets. The private label business is generally shrouded in secrecy, with companies and supermarkets signing confidentiality agreements about their contracts.
The Senate inquiry has heard evidence that small to medium Australian firms are losing shelf space to cheap private label products backed by the big two.
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