Fruit and vegetable providers depend on supermarkets but lack power to negotiate with the industry giants and face significant costs in supplying them, an inquiry has heard.
Coles, Woolworths and Aldi are the main conduits for vegetables, leaving producers highly reliant on them for sales, the industry's peak body told the Australian Competition and Consumer Commission probe on Friday.
Export opportunities are few and about 98 per cent of the vegetables grown in Australia are consumed here, AUSVEG public affairs manager Lucy Gregg said.
Fruit Growers Victoria's Michael Crisera said there were similarly low rates of export for apples and pears, although stonefruit, citrus and grapes had some overseas opportunities.
Produce growers have told an inquiry of high costs and challenges in supplying the major chains. (Dave Hunt/AAP PHOTOS)
But orchardist Peter Hall said fragile export markets lacked the certainty of a supply arrangement with national supermarkets, which providers were reluctant to endanger.
It was rare for a new entrant to supply fruit to supermarkets but it was equally rare for an existing one to lose their position, he said.
While supermarkets assumed responsibility for the produce once it arrived at distribution centres, there were costs involved for growers and suppliers before then.
One of them was packaging, which had created recent disquiet, Mr Hall said.
Supermarkets were demanding more environmentally friendly packaging amid a phase-out of single-use plastics, requiring significant investment in machinery.
Different supermarkets required different crates for loose fruit and their own branding on packaged fruit, which meant that if produce was rejected it needed to be repacked to be sold elsewhere.
"It's a very expensive operation to do that," Mr Hall said.
Ms Gregg said rejected vegetables were often donated to food charities or simply dumped.
"It's not feasible for such a low-margin product to send it back to repack," she said.
Growers were "price takers" rather than setters, the inquiry was told.
Fresh produce growers are "price-takers" with little bargaining power, an inquiry has been told. (Joel Carrett/AAP PHOTOS)
Many fruit and vegetable suppliers previously expressed concerns about their capacity to negotiate prices, the commission noted in its interim report in August.
Other concerns related to supermarkets encouraging oversupply then rejecting produce.
"These suppliers suspect some rejections are to manage supply levels rather than reflecting genuine quality concerns," the commission said.
Some complained of being held liable for damage caused to produce during freight while not being able to choose the transport provider.
"Suppliers consistently reported they would not raise their concerns with the supermarket due to fear it would jeopardise their commercial relationship," the commission reported.
Australian Food and Grocery Council chief executive Tanya Barden earlier told the inquiry suppliers lacked contractual certainty until purchase orders were made, particularly impacting fresh produce suppliers.
Profitability had also fallen in the industry as manufacturers struggled to pass on their own increasing costs to supermarkets, she said.
Representatives from Woolworths, Coles, Aldi and Metcash - which licenses the IGA brand and others - will appear throughout November.
The commission's final report is due in February.