Supermarkets inquiry: Retailers allegedly ‘deliberately over-ordering’

A review into the food and grocery code of conduct has heard damning allegations of retailers engineering oversupply.

Supermarkets are deliberately over-ordering fruit and vegetables to “strategically” create an oversupply and pay growers less, a government review has heard.

The federal government’s independent review into the food and grocery code of conduct has heard from fresh produce suppliers that Australia’s major supermarkets were “buying much smaller volumes and at much lower prices” than agreed.

In his interim report released on Monday, former Labor federal minister Craig Emerson said fresh produce suppliers have little certainty over quantity and price.

“To the extent that supermarkets are deliberately over-ordering, this could strategically create oversupply to the detriment of suppliers. This practice can generate wastage and has been raised repeatedly in submissions and stakeholder discussions as a key issue in the industry,” Dr Emerson said.

The Australian Competition and Consumer Commission also raised the issue following concerns from suppliers that indicative volumes were provided but often not adhered to.

“Concerns have been raised that the final volumes requested are often substantially lower than the indicative volumes. Should this be occurring, it can be damaging to suppliers who have excess produce that does not have a clear supply channel,” the ACCC said.

“It also has a risk of distorting overall markets due to excess stock driving down produce prices.”

Major retailers Coles and Woolworths have denied any wrongdoing, and spoke of their fresh produce suppliers as partners.

A Coles spokeswoman said the retailer worked closely with growers to determine approximate quantities of produce it expected to purchase ahead of time so it could give customers in-season produce “at great prices”.

“It also gives growers the confidence to grow crops with certainty they will be able to meet demand while not creating an oversupply,” she said.

A Woolworths spokeswoman said the supermarket did not overstimulate forecasts to create oversupply.

“We share indications of customer demand for the upcoming season with some of our growers to support their planning and planting decisions,” she said.

“Many factors contribute to industry-wide oversupply – reaching beyond the segment of growers we engage with.”

But the National Farmers’ Federation’s Horticulture Council said suppliers often reported that they “rarely if ever” achieved the volumes sold into supermarkets as originally signalled through non-binding forecast figures in their individual Grocery Supply Agreements.

“It is a contention held among many growers that these figures are deliberately overstated so as to trigger oversupply scenarios which serve to spill excess product onto the wholesale market, providing a lower price benchmark and enabling supermarkets to apply even further downward pressure on the prices they’ll pay,” the NFF submitted.

NFF Horticulture Council chair Joylon Bennett said the issue was commonly reported to the organisation.

“The allegation coming from growers across a range of commodities is that they will say ‘we anticipate the market will require this amount’ and then closer to the date, say ‘disappointingly demand isn’t being met and we’ll only require this much’. Then they say we could stimulate demand if you allow us to run an in-store promotion, with the cost worn by the grower,” Mr Bennett said.

Vegetable grower body AusVeg made a similar case. “Distorting supply, and consequently price, is a serious allegation but it is widely reported in Australia,” the peak body said in its submission to the inquiry.