Customers before suppliers, says Woolies boss
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Woolworths chief executive Grant O'Brien says the nation's largest supermarket chain will always favour the customer in negotiations with suppliers, amid claims Australia's supermarket duopoly is using predatory and bullying behaviour to squeeze grocery manufacturers.
We have a contract with our customers to provide an offer for them that helps them deal with the cost of living ... and petrol is a lightning rod for that in any household economy.
Mr O'Brien said that competition in Australia was "alive and well" but that as Woolworths sat between the consumer on one side and suppliers on the other it had a "contract" with shoppers to deliver cheaper food prices.
"Our role as retailer is positioned midway between the customer and the producer and it's a balance we play everyday, we have got to make sure we are delivering better value to the customers so they are getting value and increasingly globally comparable value," Mr Grant said this morning in one of his strongest defences of Woolworths since taking on the CEO role in 2011.
"At the same time we have got to make sure we have got a sustainable supply chain and manufacturing base and that's the wire that we tread but the customer is the reason why this business exists and that's who we favour in those negotiations."
During an earnings briefing for Woolworths' half-year profit this morning the questions were dominated by the perceived power of the two leading chains, Woolworths and Coles, and the pressure they exert on the nation's suppliers.
Mr Grant passionately defended Woolworths' role in the community, saying for example its petrol discount scheme - which has recently come under criticism by the nation's competition regulator - was a huge benefit to consumers as they battled the higher cost of living.
He said Woolworths had a "contract" with the community to act in this way.
"We have a contract with our customers to provide an offer for them that helps them deal with the cost of living and the rising cost of living, and petrol is a lightning rod for that in any household economy."
He added that his focus was on delivering low prices and value to customers, underlining the suggestion it wasn't Woolworths goal to boost the bottom line of suppliers. Complaints from suppliers were not new, he said.
"The customer is wanting to lower their cost of living so they can balance their budget and the supplier obviously has to maintain a sustainable business, we operate in between and we wear the praise of the customers and scorn of the suppliers sometimes.
"It's a balance we have got to play and we are happy to do that, but as I said it's a relationship we favour in the customers' direction."
Suppliers might not greet this admission with much fanfare.
The heat was turned up on the supermarket chains by ACCC chairman Rod Sims this month when he told a Senate estimates committee in Canberra he would investigate mounting allegations that Woolworths and Coles might have engaged in improper practices to force down prices from suppliers.
Woolworths and Coles, which combined control around 70 per cent of the market, have consistently denied the allegations, with Coles owner Wesfarmers recently revealing it had launched its own investigation into the accusations of bullying and improper dealings around supply negotiations.
The ACCC has warned it will use its compulsory information powers to collect evidence on supplier arrangements after 50 unnamed suppliers approached it with claims of improper dealing by the chains.