COMPETITION for customers in the supermarket sector is reaching fever pitch as Coles challenges Woolworths for supremacy in the ''fresh food'' market by slashing prices on fruit and vegetable staples.
But farmers, small businesses and consumers could end up paying the price because benchmark prices will be set on the basis of this year's bumper crops.
This could see prices set more than 25 per cent lower than they were this time last year, with industry group AUSVEG reporting the weighted national total wholesale vegetable price for the week ending January 18 this year was 27.5 per cent lower than in the same week in January 2011.
In the supermarket price war's latest development, Coles announced it would cut the price of some vegetables by up to 50per cent as part of its ''There's no freshness like Coles freshness'' marketing campaign, which includes 12 fresh fruit and vegetable ''super special'' deals each week.
Coles fresh produce general manager Greg Davis said while quality was the key factor in fruit and vegetable sales, competitive prices were also important to cash-conscious consumers.
Woolworths soon responded by reducing prices on a selection of its fresh produce items, while reiterating its commitment to its ''Fixed Price Guarantee'' on five fruit and vegetable lines.
Woolworths director Greg Foran said customers wanted to be confident they were getting the best products at the best prices.
''One of the biggest areas of concern for our customers is the fluctuating price of fruit and vegetables,'' he said.
''Our customers can be confident that the fixed price is below the average sell price for each line over the last 12 months.
''Apples, carrots, onions, tomatoes and potatoes are five of the most popular fruit and vegetables we sell every day.''
But Foran qualifies the commitment to keep prices down in case of natural disasters.
''As we source approximately 97per cent of our fruit and veg from Australia, we are often at the mercy of the Australian environment and things like flood, drought and extreme weather all affect the availability and, in turn, the price of fruit and vegetables,'' he said.
But Opposition small business, competition policy and consumer affairs spokesman Bruce Billson said many of the low prices now available to consumers were the result of good growing conditions over the past 12 months and a bumper crop, making them unsuitable to use as a benchmark.
''It's great consumers are able to access discounted fruit and veg at a time of bumper supplies, but the Coalition is concerned about the longer term effects unsustainable discounting could have on the economy,'' he said.
''I understand consumers want to see discounts every time they push their trolley down the aisle but we have to be responsible economic managers and look at the economy as a whole.
''In a properly functioning competitive market consumers should be able to see savings on fresh produce at all retail outlets, big and small.
''The great growing conditions Coles has pointed to as the reason why discounting is possible should see fruit and vegetable savings available for consumers regardless of whether they shop at a big supermarket or the local greengrocer if healthy competition exists.
''If only Coles and their customers have access to the benefits of a bumper season, then other factors must be at play that risk undermining long-term producer and consumer interests.''
National Farmers' Federation president Jock Laurie is also sceptical about slashing fresh fruit and vegetable prices, saying primary producers will end up footing the bill for the supermarket giants increasing short-term sales.
''The cuts don't necessarily provide a positive outlook for farmers who grow the produce,'' he said.
Industry group AUSVEG also questions the impact of the price wars on the sector's viability.
Public affairs manager William Churchill said while some growers would benefit from heavy discounting that moved a lot of product, others would be forced from the industry.
''The scheme provides some select growers the opportunity to sell higher volumes of produce at a discount and still maintain a successful business - but not all growers are in a position to supply the enormous volumes required to make a profit from these discounted sales,'' he said.
''The drive by the major retailers to capture market share will place an untold amount of pressure on many other growers who aren't supplying Coles, as competitors try to replicate this kind of offer to their customers. The adverse impacts of this kind of campaign will become evident in time particularly for growers who are committed to supplying Woolworths, independent retailers or wholesale markets as customers shift to Coles stores.
''Ultimately, growers who don't supply Coles will be left in limbo.''
Construction, Forestry, Mining and Energy Union national secretary Michael O'Connor said the duopoly of the big two supermarkets needed to be closely monitored by the Federal Government to see if the fruit and vegetable price wars would have unintended consequences in a sector worth $76 billion a year.
''It is not in the national interest to have this extraordinary market concentration enjoyed by the duopoly impacting on our farmers now too,'' he said.
''It's time these companies exercised more social responsibility for Australian jobs and families.
''Woolworths announced a net profit of $2.12 billion last financial year and Coles' profit was $1.6 billion.''
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