SUPERMARKETS sell private label products because there's a demand for them, writes JOHN DURKAN
The contribution of big companies such as Coles to rural and regional Victoria is conveniently forgotten by those with a commercial or political agenda who simply want to bash supermarkets because they are easy targets at the retail end of the food chain.
There are many players in the supply chain between the paddock and the plate, including agents, processors, exporters and transport companies.
They are rarely mentioned in despatches because they are less visible private operators or multinational companies but they all take their fee along the way and they all ultimately contribute to grocery prices.
The pricing of some very important staple grocery products such as milk, meat and bread are also influenced by factors such as global commodity markets because a large proportion of those primary products or their ingredients are exported.
The fact is that Coles makes a significant contribution to rural and regional Victoria.
Coles operates 135 supermarkets, convenience and liquor stores across rural and regional Victoria and employs over 28,000 people in the state, many in their first jobs and others in casual or part time jobs that provide critical off-farm income in tough times.
Last year alone, Coles purchased over $500 million in fruit and vegetables from hundreds of Victorian farmers.
This does not include value-added products such as milk, bread or meat and deli products such as cheese, or canned fruit and frozen vegetables purchased from food manufacturing companies in rural or regional Victoria.
It is therefore disappointing to read recent articles that distort the facts about home brands.
In particular, the article "Home brand invasion" overstated the degree of private label groceries on supermarket shelves and the proportion of private label groceries that are imported.
Australia's milk processing industry is dominated by three large multinational companies. All three are foreign owned. Processors set the farm gate price for milk purchased from dairy farmers, not supermarkets.
As Coles' milk sales are less than 4 per cent of total milk production in Australia, we have little ability to influence farm-gate milk pricing.
It is a similar story in the wheat industry where several big flour millers and two big food manufacturers dominate flour and bread production in Australia.
Nearly one of every two loaves of packaged bread is sold outside supermarkets and less than one in three loaves of packaged bread sold in supermarkets is private label, so once again, supermarkets have little ability to influence bread pricing.
An increasing proportion of meat is also exported and a third of all fresh meat is sold by independent butchers, so global and domestic competition has a big impact on meat prices.
Like milk, Coles buys its meat from processors who set the abattoir price for meat and all fresh meat sold by Coles is Australian grown.
It is simply a myth that most private label products are imported. In fact, over 80 per cent of Coles private label products are made in Australia.
It is a similar story for liquor. Less than 2 per cent of beer and less than 15 per cent of wine is Coles' private label and the vast majority of beer and wine sold in Coles' liquor outlets is made here in Australia.
The reason that Coles sells private label groceries is because the 12 million customers - both city and rural - who shop with us every week want them. If they did not buy them, Coles would not sell them. It is as simple as that.
- John Durkan is Coles merchandise director
