Coles executive warns food inflation still a concern and divestiture powers could further hike prices

The supermarket giant’s commercial boss has warned threatened divestiture powers could result in food and grocery prices rising even higher.

Coles chief commercial officer Anna Croft says inflation remains a concern for shoppers as food commodity prices stay elevated, and if threatened divestiture powers force supermarkets to sell off stores it would likely lead to even higher prices at the checkout.

Ms Croft said the supermarket giant’s food suppliers were still knocking on its door asking for price hikes to help manage their own bloated costs — led by energy, labour and commodity prices — although the rate of those supplier requests was starting to trend back to pre-Covid levels.

“I think there is no doubt there is real cost pressure in the system and we are seeing commodity prices such as cocoa (be) incredibly challenging, there are costs that our partners are facing through shipping inflation which is coming through and is very real,” Ms Croft told The Australian’s Global Food Forum for 2024 in Brisbane.

“We have seen a step off in the absolute number of cost prices increases coming through. In the height of 2022 and 2023 we were probably running at about 10 to 12 times our baseline of the number of cost increase requests coming through each month, and that has probably settled now to two to three times our base pre-Covid.

“So there is still pressure there,” she said.

Coles chief commercial officer Anna Croft speaking at the Global Food Forum in Brisbane. Picture: Glenn Hunt

Coles was managing the flow of price increase requests from its suppliers, but at a time when consumers were feeling the rising pressures of higher bills and the general cost of living crisis now gripping many households.

Ms Croft said cost of living and food inflation pressures were ever-present among her shoppers and were now changing customer habits, with more people staying at home and being more choosy with how they spend their money.

“Customers are really concerned about how they are going to cover their costs. We’ve had 13 rate rises, we’ve got fuel inflation, cost of living bills. And also customers are seeing that and being reminded of that through inflation in our supermarkets every week,“ Ms Croft told the Global Food Forum.

“And we are definitely seeing the trends of how they are behaving change. So, 60 per cent of customers saying they’re cooking at home and they’re looking for inspiration and convenience solutions.”

She said shoppers were also filling their baskets with more frozen foods and food packaged in bulk to help them manage their spending and spread meals through the week.

While customers are being driven by special promotions and discounting, many which are no longer going out are also turning to premium products, Ms Croft said, as cooking from home grows in popularity.

Ms Croft reminded the audience at the Global Food Forum Coles and the supermarket sector was facing 12 different inquiries from various governments and agencies including, along with Woolworths, a bruising Greens-led Senate inquiry into the industry.

An issue raised by the Greens and some activists has been the introduction of divestiture powers which could see large retailers, such as Coles, forced to sell off businesses or stores to reduce market power.

The controversial policy measure got a boost last month when Liberal leader Peter Dutton launched a plan for new divestiture powers to break up major hardware and grocery retailers.

But, Ms Croft warned forcing supermarkets to dispose of stores would put a significant dent in operational efficiencies when overseeing the delivery of food from farm to stores, threaten retailer economies of scale and ultimately push up costs which would likely lift food and grocery prices.

“We run 850 supermarkets across the whole national footprint and we have a very high fixed cost base, be that through our distribution network or tracking network, or our buying teams working with suppliers.

“Now, if we had 750 supermarkets it actually wouldn’t make a meaningful difference to our fixed cost base and therefore it would really impede our ability to fractionalise those costs across our business and to drive greater efficiency. And therefore as a result of that it may lead to higher prices for customers.”