Coles: We’re down, not dirty

Stephen McMahon
May 31, 2013
News Limited Network

LOWER prices may be here to stay as suppliers battle to cut costs and the nation’s supermarket giants fight it out for market share.

At the same time pledging to keep prices down, Coles boss Ian McLeod denied the retailer bullied suppliers and threaten their livelihoods to drive down costs.

He said the promise to keep prices down for customers comes from generating greater efficiencies between the supermarket operator and the supplier and is not just a branding exercise but the key to the retailer’s revival in recent years.

After decades of rocketing prices, the big supermarkets have been delivering price deflation of around 3-4 per cent in recent years.

“And that is not going to go away and will only intensify with the competition,” Mr McLeod said.

“Lower prices are central to what we have done in the last five years and will be central to what we do in the next five years.”

The success of the group’s “Down, Down” campaign, fronted by veteran rockers Staus Quo, has also given the supermarket a major boost, Mr McLeod said.

“Love it or hate it, it gets remembered, with about 93 per cent of people in surveys remembering it is a Coles ad.”

In an interview with News Ltd, to air on Channel 10’s Meet the Press on Sunday, to mark Mr McLeod’s five years in the top job, he admitted that when he came out to Australia shoppers were paying way too much for their groceries and the outlets were tired and old fashioned.

Under Mr McLeod, Coles has both revamped almost half of the group’s 700 plus outlets and taken a much tougher stance with suppliers from fruit and vegetables to milk.

But the Coles managing director denies claims of “bullying” from some supplier groups as an extreme perspective that doesn’t stand up to investigation.

“If suppliers have a concern they can write to me personally and I will investigate, but I don’t think there is anything systematic that were are doing that means we have fundamental issues at Coles,” he said.

“The vast majority of the price reduction have been funded by ourselves. It is about becoming more efficient and working with our suppliers to also become more efficient. And you can then see prices come down as there is more flexibility.”

The biggest challenges for Australian retailers, however, is trying to get a good deal from the big multinationals, who are often retailing the same product at twice the price in Australia as in Asia.

Mr McLeod that while there may be some justification for slightly higher prices, but it isn’t the whole truth and some of the larger suppliers are using their size to demand higher mark-ups.

“Labor costs are part of the reason but they are not the whole reason. When you see some products made in Australia being sold cheaper overseas then you really have to question it,” he said.