The major supermarkets sometimes paid fruit and vegetable growers below the cost of production, suppliers told the Australian Competition and Consumer Commission inquiry recently.
The inquiry heard that agreements offered to suppliers were a loose arrangement which didn’t guarantee volumes or prices, and negotiations on prices often took place after the product was grown or harvested.
Witnesses included Tatura grower Peter Hall and Fruit Growers Victoria grower services officer Michael Crisera.
The two men, along with AUSVEG general manager Lucy Gregg, spent seven hours at the Sydney hearing, being questioned by the ACCC panel and the counsel assisting the inquiry in the investigation into the national supermarket duopoly.
Mr Hall told the inquiry when a supermarket customer sees pears for $1.99 a kilo, no grower is making money out of that.
The hearing, on November 8, threw some light on how the big supermarket chains negotiate with growers.
Suppliers submitted weekly tenders to the supermarkets, with a requested price, and the supermarket buyers came back to negotiate, verbally, on price and volumes.
The inquiry heard that suppliers will sometimes be told that ‘X’ supplier is offering fruit at so much per carton, and they will need to meet that price. Invariably the suppliers had to take the price offered.
The growers are often not told who is offering the alternative price, and, in any case, the growers aren’t permitted to share their price negotiations with other growers, according to the terms of their contract with the supermarkets.
The inquiry heard that suppliers who didn’t meet the supermarkets’ demands for certain prices could be placed on a ‘holiday’ where their orders dropped for a few weeks.
Mr Hall said it might be termed as simply business, as a business supported people that are supporting their lower pricing regime. Supermarkets would divert more of the sales to the suppliers with the lower price. However, he said it could also engender fear on behalf of the supplier who might not be able to shift their crop.
On margins earned by supermarkets, Mr Hall said he had noticed, since COVID-19, how margins had increased closer to 60 to 100 per cent above what the growers were paid for some fruit.
He said he looked at a supermarket price for Pink Lady apples in the week of the hearing and noticed they were about $4.90/kg. He said growers were getting about half of that.
Mr Crisera said his members had noticed mark-ups were gradually creeping up from 30 to 60 per cent, to between 60 and 100 per cent.
Fruit Growers Victoria has complained that the costs of labour, fuel, electricity and fertilisers have increased for two of the past three seasons.
Mr Crisera said the growers did not have control over many of their inputs, which have increased by between 25 and 40 per cent.
Labour costs made up at least 60 per cent of the costs.
Mr Hall appealed for transparency in pricing and costing.
He said the supermarkets may think that the suppliers simply wanted more money.
The truth is, he said, is that suppliers love growing fruit.
They just wanted to do it in a sustainable way.
Speaking after the hearing, Mr Hall said he hoped the supermarkets would recognise the power imbalance in determining the prices they charge and prices they pay.
They also need to acknowledge the role they have in determining how much fruit and vegetable product Australians eat by their pricing strategies.
He said supermarkets require their suppliers to sign up to ethical treatment of their workers, including paying a sustainable wage.
“We would ask that supermarkets apply the same principles to what they pay us.”
Speaking after the inquiry, Mr Crisera said he hoped the inquiry would result in fairer outcomes for growers.
The inquiry is continuing. The proceedings are broadcast on live-stream through the ACCC website.