Coles CEO warns supermarket prices may continue to rise
Supermarket bills are expected to soar in the coming months as Coles and Woolworths walk a tightrope between keeping prices low for consumers and satisfying the many suppliers asking to raise prices.
"As I sit here today, we have got five times as many requests for price increases as we had last year. Five times," Coles CEO Steven Cain said.
Mr Cain, who was addressing attendees at The Australian Global Food Forum, warned of an impending hike in grocery prices across the country as a number of suppliers have requested price increases in the last year due to skyrocketing production costs and labour shortages.
"And they’re not small amounts. It's not two per cent or three per cent being asked for either so there is, you know, the usual 'pig in the python' trying to work its way through the system, whether things plateau or whether they come down slowly remains to be seen," Mr Cain told the forum.
Inflation remains a major concern
Woolworths, which shares Coles' sentiment over price increases, says inflation remains its main concern following a surge in fuel prices and supply chain blocks.
"Managing inflationary pressure continues to be the focus for us," CEO Brad Banducci was quoted in a Reuters report.
Woolworths customers saw a 2.7 per cent increase in food prices in the last quarter, less than Coles' 3.3 per cent, but Banducci says with the "current environment, it remains uncertain" if Woolies will be able to keep prices below the broader economy.
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Will rising costs result in products disappearing from shelves?
Mr Cain's comments at the Global Food Forum come on the back of backlash from customers after snack brand Ryvita was pulled off shelves in Coles and Woolworths stores across the country.
In a statement provided to Yahoo News Australia, Ryvita said that it had experienced a significant increase in costs to make and distribute its products and, as a result, had to increase the prices at which it sells products to retailers.
Ryvita further explained that Woolworths and Coles declined to accept the increase and made the decision to remove its products from their stores.
Coles, which had initially remained silent on the matter, explained why it had taken the brand off its shelves in a response to a customer requesting their return on Facebook.
"It's our job to provide customers with choice and value but with limited shelf space we have to balance providing choice with making sure the most popular products customers want to buy are available every time they shop," Coles said. "Keeping products that are not selling on shelf makes this difficult."
In an interview with Yahoo News Australia, Gary Mortimer, professor of marketing and consumer behaviour at QUT, explained that there is no correlation between inflationary pressures faced by supermarkets and de-listing of products such as Ryvita.
According to Mr Mortimer, supermarkets quite regularly renegotiate supply contracts, and take into consideration a variety of factors.
"When products are de-listed, a lot of factors come into consideration such as sales volume and demand. It is very uncommon for products of high sales and demand to be de-listed. Many customers might be surprised despite buying it," Mortimer said. "It is surprising to see quite a popular line taken off the shelf."
Demand the ultimate decider
"If there is less demand, it makes reasonable sense to take it off the shelf even if prices are doubled," Mr Mortimer said, explaining that all inflationary pressures faced by suppliers are faced by supermarkets as well.
It is however not uncommon to see brands disappear, only to reappear on shelves later on, Mr Mortimer said, citing a price war between Arnott's and Coles over its biscuit line in 2015 as an example.
In an attempt to hold prices down, some products would reappear on shelves with a slightly lesser range, he said, explaining that if a company had a range of 20 lines, the range would usually be reduced by removing some slower selling lines. Selling less products of a particular range would cost less and give way to other products on precious supermarket shelves.
Asked it he thought Ryvita would make a comeback, Mr Mortimer replied, "If there is a significant demand."
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