Suppliers to the Australian supermarket duopoly of Coles and Woolworths are being squeezed as the companies fight for market share, according to a brand building specialist.
Troy McKinna says to steal market share from each other and to combat ALDI’s low prices, Coles and Woolworths have obsessed about lowering prices.
“But rather than reducing operating prices to do this, such as stacking pallets on the floor like ALDI, they have focused on the price they pay for goods. With significant market power, they have been able to ‘negotiate’ price reductions, fundamentally shifting margin from suppliers’ profit and loss to theirs.”
He says their “aggressive agenda” to strengthen their businesses has been at the expense of suppliers and has slowly strangled the life out of Australian packaged goods brands.
“Lower margins, reduced ranges and hostile environments have made it difficult to drive innovation and invest in building brands.”
He says for the industry to resuscitate itself from the duopoly it needs to think long-term and go back to brand basics.