Coles’ Chris Nicholas tells suppliers to watch cost rises

Coles has warned grocery manufacturers that it will not “simply wave through” supplier cost increases.

Coles says shoppers need to know the supermarket will deliver low prices.

Coles has delivered a stark warning to grocery and food manufacturers that the supermarket chain will not “simply wave through” supplier cost increases to customers as the stress on household budgets intensifies.

Backing the warning with data from the supermarket aisles, a senior Coles executive has reminded suppliers that when the price of their brands rises, there is an immediate lift in Coles’ private label sales.

Merchandise director Chris Nicholas told the Australian Food and Grocery Council conference in Brisbane last week the retailer was committed to lowering shelf prices and it expected the $125 billion food and grocery processing sector to work along with it in this prime goal.

Mr Nicholas also alluded to the strongly held belief among supermarket retailers that international grocery suppliers were still treating Australia as a “treasure island’’ when it came to pricing, with a comparison of ­prices to Europe showing some products in Australia were 50 per cent more expensive.

In his speech to the annual AFGC conference, Mr Nicholas reminded his supplier audience that cost-of-living pressures meant family budgets were under incredible strain.

It was now a “passionate commitment” by Coles to guarantee the past few years of price ­deflation was not a blip but “here to stay’’.

“Value is in our DNA at Coles. Coles has delivered 24 consecutive quarters of food-and-liquor price deflation in our stores. We’re proud of that consistent six-year effort to reduce the cost of the shop,” Mr Nicholas said to the closed-door event. A copy of his speech has been obtained by The Australian.

“For us, the food and groceries price deflation of recent years is not a statistical blip, an historical anomaly or a temporary market adjustment. It is a passionate commitment. It is here to stay.”

He said Coles shoppers had to know that when they walked in the door, they would be guaranteed low prices, and suppliers could not simply pass on their costs to the retailer and expect it to be then passed to consumers.

“So cost price increases will not just be waved through; adding to our cost of doing business runs headlong into our commitment to lower prices. Coles is striving always to get our customers the best possible deal. We need our suppliers to be there alongside us.”

Two years ago, Coles refused to “wave through” large cost increases demanded by the maker of Tim Tams, US-owned biscuit company Arnott’s, leading to a blockade of the supermarket chain by Arnott’s as it refused to supply certain lines of the biscuit.

Mr Nicholas said 40 per cent of families had $150 or less to spend on their weekly grocery shop, and he invited the audience to attempt to stay on that budget and meet the needs of a family with children.

“Go into a store with $150 in your pocket and front up to the tough choices faced by so many Australian mums as they shop for their families for the week ahead — dinners, breakfasts, milk and bread for a week, school lunches, fresh fruit and veg, ­toiletries, cleaning agents, snacks for the kids, desserts,” Mr Nicholas said.