Multinational giants urged to front supermarket inquiry for ‘playing hardball’

Global multinational food giants such as Nestle, Coca-Cola, Mars and PepsiCo are facing a push to front the Senate inquiry into supermarket prices, after being accused of playing hardball with Australian retailers and driving up prices at the checkout.

The Australian Retailers Association chief executive Paul Zahra called on large multinational suppliers to appear at the inquiry, arguing these businesses often had parent companies several times larger than Coles or Woolworths and would set prices on household brands that often left local retailers no option but to accept price increases.

Multinational food manufacturers, which Woolworths says makes up 60 per cent of all sales, are being urged to front the Senate inquiry into supermarket prices.Credit: Dominic Lorrimer

“Multinationals play hardball, and it comes down to power. It’s not specific to food … in a multinational pricing negotiation, the retailer has very little to no movement on price,” he said.

Zahra urged the Senate inquiry to examine the transparency of the supply chain on pricing, as well as ethical sourcing and conduct.

“It’s got to go beyond the retailer input. You’ve got to include the full supply chain from the very beginning of the product being sourced, right through to its transportation, to then being sold in store,” Zahra said.

The Australian Retailers Association’s Paul Zahra.Credit: Alex Ellinghausen

Globally headquartered companies such as Unilever, Procter & Gamble, Mondelez International or Kraft Heinz are not obliged to publicly reveal their Australian profit or revenue.

However, IBISWorld data estimates Nestle’s Australian net profit at $2.6 billion with a 5 per cent profit margin; PepsiCo’s profits at $2 billion with a 2.4 per cent margin; Mars Wrigley at $1.8 billion with an 8.3 per cent profit margin; and Unilever at $1.1 billion with a 3.5 per cent profit margin.

Overseas, Kraft Heinz’ net margin is 8.9 per cent, PepsiCo’s is 10.3 per cent and Unilever’s is 13.8 per cent.

In Woolworths’ submission to Dr Craig Emerson’s review of the food and grocery code of conduct, the supermarket stated large multinational suppliers sell “must-have brands” that accounted for more than 60 per cent of all sales in 2023.

The biggest 100 suppliers accounted for more than 80 per cent of all price increases.

In categories such as pet needs, two major suppliers represent more than 50 per cent of sales; in snacks, the top three suppliers account for 62 per cent of sales in that category.

“Large suppliers are often robust cost price negotiators and may, in some cases, withhold the supply of products as part of the negotiation,” Woolworths said in its submission.

“In many cases, we are obliged to accept these cost price increases or face an inability to supply our customers with well-known brands.”

The inquiry’s terms of references includes a mandate to examine “the role of multinational food companies in price inflation”.

No multinational companies have been called to face the inquiry so far.

Western Australian Labor senator Glenn Sterle said the inquiry committee had called “a diverse range of witnesses” to provide evidence but did not say whether this included multinational companies.

“The committee is continuing to consider further public hearings,” he told this masthead.

Tasmanian senator Tammy Tyrrell said it was the go-to for the major supermarkets to blame multinational companies. “There’s always someone bigger and badder to pass the buck too, right?” she said.

“It’s on the major supermarkets to sit before the Senate inquiry and explain to Australians why their grocery bill is going up, but the items in their trolley are going down.”

Other Senate select committee members have been contacted for comment.

Australian Food and Grocery Council chief executive Tanya Barden, who represents food manufacturers that supply to supermarkets, objected to Woolworths’ characterisation of multinationals withholding supply.

“Product is still available for sale, the retailer is just choosing not to buy it at a new price,” Barden said. “They’re not withholding supply, they’re wanting to sell it … the supply’s available for sale, it’s just the retailer’s not wanting to purchase it at that price.”

Multinationals often make lower margins in Australia than they do overseas, Barden added.

Australian Food and Grocery Council chief executive Tanya Barden.Credit: Ryan Stuart

“It’s important that they are able to operate profitable businesses in Australia, otherwise manufacturing risks moving offshore.”

In 2019, Australian shoppers were unable to purchase Nestle-owned Uncle Tobys oats after Woolworths refused to pass through a 6 per cent price rise.

Customers were also unable to purchase pet food brands such as Whiskas and Pedigree from Woolworths and Coles following a similar situation with Mars Petcare.

In January, French supermarket Carrefour pulled PepsiCo products such as Lay’s chips and soft drink 7Up from shelves due to “unacceptable price increases”.

Inquiry hearings will resume on Monday when former ACCC chair Allan Fels, unions, the competition watchdog, Treasury and the Department of Agriculture are due to appear.

Coles and Woolworths chief executives Leah Weckert and Brad Banducci will appear on Tuesday.

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