Coles boss Leah Weckert tells ACCC inquiry private label not used to undercut suppliers

Coles CEO Leah Weckert has told the ACCC inquiry into supermarkets that private label isn’t being used to undercut suppliers of branded groceries or weaken their bargaining power.

Coles CEO Leah Weckert, left, appears with other executives before an ACCC public hearing as part of the supermarkets inquiry.

Coles chief executive Leah Weckert has defended the role of private label or “own brand” food and groceries as giving customers more choice, especially at lower shelf prices, and denied the supermarket giant was using them to undermine suppliers of branded groceries.

Ms Weckert has also told the competition regulator’s inquiry into the $125bn supermarket sector that there was fierce competition among the main retailers – especially when that included non-supermarket players such as Amazon, Bunnings and Chemist Warehouse – matching the position of Woolworths CEO Amanda Bardwell, who appeared before the inquiry earlier this week.

Appearing before the Australian Competition & Consumer Commission public hearing into the supermarkets on Thursday, Ms Weckert, flanked by three senior Coles executives, was grilled for almost six hours by counsel assisting the inquiry Naomi Sharp SC across a range of issues, from private label and Amazon to pricing and online shopping.

After questioning Ms Weckert in the morning on pricing, competition with Woolworths and the wider retail market, Ms Sharp turned to the issue of private label groceries or “own brand” products and if the proliferation of private label items – and their cheaper prices – was undercutting suppliers of branded goods or being used to reduce their bargaining power.

“No, that is not our reason for putting them (private label) in (stores),” Ms Weckert responded.

“We are very much driven by a customer need that we see in the category that we are looking to fill the gap.”

Ms Sharp asked if Ms Weckert accepted that having a larger range of private label products may diminish the bargaining power that branded suppliers had when they came to the negotiating table with Coles.

Coles CEO Leah Weckert testifies at the ACCC inquiry into supermarkets.

“Private label has been part of the fabric of the offer within the grocery space for as long as I have worked in grocery, all around the world, and I think customers expect these days to get a variety of price points that are available to them,” Ms Weckert said.

“We aren’t able to fulfil all those price points if we are solely reliant on proprietary (brands) and we use own brand as an important way to do that. That being said, two-thirds of our sales are still proprietary products, they are a very important part of our offer and we know that’s why many customers come and do their shop with us, so from my perspective both play a really important role in our business.”

She said many of these private label or own brand groceries that Coles created and invested in were for products that were “unique and different”.

“They are not things that seek to replicate a proprietary product that is already in our range,” she said.

Ms Sharp said if Ms Weckert had reflected on what impact the spread of private label products was having on the negotiating position of branded suppliers.

“I’m sure our proprietary suppliers would love it if we had no own brand. In many of our categories the level of concentration that we have from our proprietary suppliers is very significant,” Ms Weckert said.

She said in areas such as soft drinks, biscuits and chips they were “heavily dominated” by sales from brands.

Later, Coles chief commercial officer Anna Croft told the hearing that, when Coles was in negotiations with suppliers over accepting price increases, it did not discuss its margins, but kept that as a separate discussion.

Ms Sharp referred Ms Croft to testimony from suppliers group the Australian Food and Grocery Council, in which its representatives said “margin expectations” would be a part of supplier negotiations when considering a price increase at the wholesale level.

Ms Croft said margins could be discussed with suppliers at range reviews or when bringing in new products, but this would depend on which element of the negotiation. She said margin was important and discussed with suppliers, but were not part of a discussion on cost price increases facing the supplier asking for price rises.

Ms Weckert argued that competing on price was an “absolute cornerstone” of the business, but Coles was not just competing with Woolworths, Aldi and the independent supermarkets that were part of the Metcash group, it also faced competition from businesses such as Amazon, Bunnings, Chemist Warehouse and smaller local stores.

Ms Weckert said Amazon was a particular competitive threat, despite it not being a full-line supermarket, and this threat was growing as Amazon sold more packaged groceries bolstered by its Amazon Prime loyalty scheme.

“Our expectation is that it (Amazon) will continue to grow and they will continue to invest and likely to also expand their range over time.”

Coles executives will continue to appear before the hearing on Friday.

Originally published as Coles boss Leah Weckert tells ACCC inquiry private label not used to undercut suppliers