Coles pushes suppliers to strip costs as households face cost of living pressures

In a letter to suppliers, a senior Coles executive has said the lowering of costs is a ‘joint obligation’, as supermarkets face political heat.

One of Coles supermarket’s most senior executives has written to packaged food and grocery suppliers urging them to cut costs as affordability remains the key issue for consumers amid cost of living pressures and political pressure for shelf prices to come down.

In a letter to suppliers last week, Coles executive general manager for packaged grocery, Jonathan Torr, reminded them stripping away costs was a “joint obligation” of both the supermarket and its supplier base.

This would help shoppers “stretch their wallet further” he added, as pressure grows on suppliers to cut their prices to help supermarkets bring down shelf prices, as well as preserve their own profit margins.

Coles has begun to tap its vast supplier base on the shoulder to bring down their own prices, reflecting moderating inflation and a slide in many commodity prices, which the supermarket chain will use to lower prices at the checkout and neutralise some of the negative publicity around allegations of supermarket price gouging.

These allegations, as well as accusations of Coles and Woolworths misusing their market power to beat out competition and cower suppliers, will be thrust under the spotlight this month as the Greens-led Senate inquiry into the supermarkets kicks off public appearances — including from Coles chief executive Leah Weckert and outgoing Woolworths CEO Brad Banducci.

Two weeks ago Coles held a conference for its packaged grocery suppliers, and following up on the forum Mr Torr wrote to them to summarise the key themes and remind them of their need to address issues around cost of living pressures.

“Affordability is key. Whether it is offering the right pack size, great convenience, reduced waste and great value offers to ensure that our customers can stretch their wallet further,” Mr Torr said in his supplier letter.

“With many Australians doing it tough I see this as a joint obligation between all of us to work together to reduce costs and be more efficient in how we do things so we can offer value across the store and make everyday essentials affordable for all our customers.”

The Coles gathering of Australia’s biggest and most important grocery manufacturers occurs twice a year and was for packaged food and grocery suppliers only, it did not include fresh produce suppliers.

In a statement to The Australian, Mr Torr said the supermarket giant was working with its suppliers as both parties squarely focused on making food and groceries affordable for stretched households.

“We are working together with some of our biggest and most important grocery suppliers in the country to find ways to help Australians with the cost-of-living pressures they are currently facing.”

Coles CEO Leah Weckert poses for a photo at Coles Store Support Centre, Melbourne. Picture: Martin Keep/Coles

Last month The Australian revealed Coles had asked some of its food and grocery suppliers to cut their prices as rampant inflation experienced through the Covid-19 pandemic and into 2023 began to cool, with those savings likely to fund a discounting and promotions blitz.

Suppliers told The Australian they had been asked to prepare for price reduction requests of as much as 14 per cent — especially in the non-food packaged groceries area — on some products.

Coles has pointed to the improving inflationary outlook, especially in key cost pressure points such as freight, shipping and raw materials, to justify unwinding years of price hikes. It has also equipped itself with data on latest commodity price movements to justify to suppliers it talks to that prices need to come down, as their own input prices were coming off the boil.

Some suppliers have been contacted about a new Down, Down campaign which will see a fresh round of price cuts. These are currently designed as 13-week campaigns for autumn, winter and spring, and will see prices squeezed across a range of food and grocery categories.

Originally published as Coles pushes suppliers to strip costs as households face cost of living pressures