‘Deliberate manipulation’: Do supermarkets order too much fruit and veg on purpose?

Farmer groups are imploring the consumer and competition watchdog to scrutinise whether supermarkets are deliberately asking growers to oversupply fruit and vegetables in a move they say both guarantees supply and drives down prices for the grocery retailers.

In separate submissions to the Australian Competition and Consumer Commission’s year-long probe into the supermarket sector’s pricing practices, two major industry bodies representing fresh produce growers accused the nation’s supermarket giants of “manipulating” the market by putting in indicative orders that are larger than what is required.

Fresh fruit and veggie growers have asked the competition watchdog to look at whether the major supermarkets are causing deliberate oversupply of produce.Credit: Dominic Lorrimer

The National Farmers Federation’s Horticulture Council said that produce growing volumes suggested by the supermarkets have been “potentially … deliberately overstated to trigger oversupply scenarios”.

“This potential practice of deliberate market manipulation, if substantiated, is perhaps one of the most serious interferences by supermarkets in the efficient and fair functioning of fresh produce markets,” the council stated in its submission.

“Without any policing, there is a clear commercial incentive for the supermarkets to undertake such activity.”

Queensland Fruit & Vegetable Growers (QFVG) also argued that growers have less access to data about supply and demand than supermarkets, disadvantaging them in price negotiations.

“We’ve been asked why growers plant so much if oversupply impacts price? And in short – [there’s a] lack of data available to them to make good decisions. Trust us, growers don’t want to overplant as an oversupply drives down prices,” the industry body wrote in its submission.

‘The optimal result for a retailer is to have an oversupply situation. Not only does this then ensure supply, but it would also have the additional benefit of driving down buy price.’

Queensland Fruit & Vegetable Growers

“However, retailers need consistency of supply. In fact, the optimal result for a retailer is to have an oversupply situation. Not only does this then ensure supply, but it would also have the additional benefit of driving down buy price.

“We are now questioning how retailers may be manipulating free market conditions by using supplier agreements as one tactic to purposely ensure oversupply.”

Further exacerbating this issue, the grower groups say, is the nature of many agreements between suppliers and supermarkets, which the QFVG said are often not contracts but supplier agreements, and sometimes no formal agreements at all.

“For those who do have an agreement, these contain indicative production volumes without pricing or volume commitments. The agreements also have many exit options for the supermarket usually based around price, quality, and service,” the grower group stated in its submission.

The NFF’s Horticulture Council said almost all prices and volumes were determined on a weekly basis, from a few days to a week out from the harvest window. Growers and suppliers submit a price and volume to the supermarket on Monday, and on Tuesday supermarkets will come back with the price and volume they’re willing to buy produce for.

“This allows supermarkets to offer ‘take it or leave’ pricing,” said the NFF.

In a statement, Coles said it highly valued relationships with farmers.

“Coles agrees volumes in advance with its suppliers. We generally agree these a season in advance, which allows our suppliers to grow crops with certainty, while not creating an oversupply. It also gives Coles’ customers the confidence they will be able to buy in-season produce from our stores at great prices.”

Woolworths pointed to its own submission to the ACCC inquiry, which said growers are given long-term forecast estimates on volumes required.

“We then negotiate specific volumes and pricing with our supply partners each week due to the highly variable nature of supply volumes,” its submission stated.

Fruit and vegetable prices are largely driven by supply and demand, which is in turn impacted by growing conditions and weather events, Woolworths said.

“Almost all our suppliers submit pricing quotes every week as the market responds quickly to dynamic fruit and veg supply volumes. Products with less volatility in production, such as packaged salads or mushrooms, have contracted pricing in place to allow for longer-term planning with our supply partners and their suppliers.”

The ACCC will issue its interim report on the supermarket inquiry by August 31 and is expected to issue its final report by February 28.

Multiple inquiries have been held into the supermarket sector amid the rising cost of living. A Greens-led Senate inquiry into supermarket prices earlier this year made 14 recommendations, including the creation of a new regulator to target anti-competitive practices, powers to break up big supermarkets, a strengthened food and grocery code of conduct, and the closer examination of land banking practices.

The federal government has three months to respond to the Senate inquiry’s recommendations.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.