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Monday, 10 November 2008
Page: 10422

Dr STONE (8:21 PM) —I rise to strongly support the motion moved by my neighbour the honourable member for Mallee. He, like me, has some of Australia’s greatest food producers in his electorate. The concentration of ownership in grocery retailing in Australia is therefore of enormous importance to our two local economies. No other country has such concentration of ownership in the retail grocery sector. Australia is unique in this regard. Woolworths and Coles have close to 80 per cent of the retail grocery sector. These two chains also have a large share of the clothing, fuel, liquor and hardware sales in the country.

While it is well known that concentration of ownership erodes price competition, there are other major impacts of such concentration that concern me and should also concern this government. My electorate is still, despite the prolonged drought, the food bowl of Australia. We have the greatest concentration of food manufacturing compared with any other region in the country. This processed food includes dairy commodities and retail-ready production, processed fruits and vegetable products and an assortment of meats and wines. We have a stable, skilled local workforce, and the rail or road transport to the ports and domestic warehousing is fast and efficient. The fresh product is grown literally within sight and sound of the factories and processors. You could not think of a more ideal environment for growing and manufacturing great, clean and green Australian foods for local and international consumption.

But this is now in jeopardy—not because of the prolonged drought and not because of the pipeline that will take the food producers’ water to Melbourne. That pipeline is not yet built. That threat is yet to be delivered. The problem right now is the power of the grocery retailers to dictate terms to the food manufacturers and producers. Food producers nationwide are under extreme pressure from the two big grocery retailers to supply their home brands. These home brands compete directly with the companies’ own branded products and are produced in grades to mimic premium and low-cost branded options. They sit on the shelves beside the branded product. The home brands generate a far higher profit margin per unit for the supermarket than do the differently branded products, whose prices include marketing, product research and development costs.

The food manufacturing company is pressured to provide the contents of the home brand at a substantially lower price than the company’s own branded equivalent. They come to compete head-on with the same contents packaged differently, with a more competitive price on the home brand. There is no identification on the labelling to show who has supplied the product content, hence there is no customer loyalty to the food producer anymore. This gives the retailer enormous leverage over the supplier, who can be replaced with the next-lowest-priced supplier should they baulk at the extremely thin margins and the intense competition with their own branded product. Imported product can readily be switched with the locally grown produce in the home brands—that is, in the cans, the jars and the plastic packs—with little understanding from the shopper, who is very used to seeing most Australian foods sold with a label that says ‘Made from local and imported ingredients’.

Why am I so concerned if the shopper says, ‘Well, we’ve still got the choice between home brand and the branded product’—the icon brand sometimes—‘on the same shelf just a few centimetres apart’? The problem is that, if you knock out Australian producers’ viability, if they are squeezed so hard that they become unviable, you have to ask: what supplier of this nation is then going to look after the environment? Who will be the stewards of the land and water resources, the providers of the environmental services that deliver to all of us the fresh air and the water supply? The nutritious foods themselves are of extreme importance, but Australia’s primary producers are also the stewards of our country and they provide the ecosystem services.

If the big two retailers make it too hard to get proper margins to stay in business then we are looking at a situation such as we have right now where citrus growers are struggling, where pork producers are just about out of business—yes, there will be a shortage of ham for Christmas—and where berry producers say it is just too hard. We in Australia will in the future go from product to product and say: ‘It’s not ours anymore; we cannot be food producers in this country because the big two have simply switched and swapped. Their home brands are full of imported ingredients and the shopper does not really know.’