Grocery giants fending off a suppliers’ attack

A TRICKLE of petitions from suppliers for price rises last year has turned into a flood, with Woolworths shifting more staff to its commercial division to deal with requests.

And the nation’s biggest supermarket chain expects to add further to those teams as supplier price increase requests flood its commercial departments.

Woolworths has confirmed the volumes of suppliers now approaching it to raise prices to counter the skyrocketing cost of doing business is five times previous levels, with some food and grocery manufacturers coming back for a third time with price requests.

“In recent months, we have received five times as many requests for price increases from suppliers than usual,” a Woolworths spokesman said.

“In some cases, suppliers are coming in for second and third pricing requests, given the volatility they are experiencing from a range of factors including transport and raw material cost increases.

“As a result we have substantially increased the size of the team who manage these requests. We always seek to fairly and reasonably balance the interests of suppliers and provide good value for our customers.”

The ability for Australia’s two leading supermarket chains, Woolworths and Coles, to balance the demands of suppliers to lift prices with the interests of their shareholders to maintain profit while also keeping prices down to help shoppers will play out in coming months.

The trend is also emerging as a key driver of inflation, which has already tipped over 5 per cent and could continue to accelerate this year as the cost of everyday food and grocery items soars to reflect the sharply rising cost of key agricultural commodities, energy, labour costs and energy prices.

Woolworths chief executive Brad Banducci wrote on Monday to the independent reviewer of the supermarket sector’s Food and Grocery Code of Conduct, Chris Leptos, detailing the problem.

He also pledged to improve its process for reviewing cost price increase requests.

Its rival Coles is experiencing similarly high levels of price increase requests from its suppliers and is also working on reviewing its supplier pricing processes.

A recent survey of supermarket prices by investment bank UBS showed that at Woolworths inflation was running at 4.3 per cent over the third quarter, more than triple from just 1.4 per cent in the second quarter. At Coles, March quarter inflation was 3.2 per cent, up from 1 per cent in the previous quarter.

Australian Bureau of Statistics data for March quarter inflation reported grocery inflation had hit 5.3 per cent, which contributed to the breakaway overall inflation rate that ultimately began the current cycle of interest rate tightening by the Reserve Bank.