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Woolworths supplier demands under inquiry grill

Woolworths has contingency plans in place to cope with a strike by warehouse workers.

Woolworths has contingency plans in place to cope with a strike by warehouse workers. Photo: AAP

A former Woolworths heavyweight admits she doesn’t understand rebates the supermarket giant expects from suppliers, despite their role in helping executives hit profitability pay bonuses.

Current and former executives again fronted the competition watchdog’s supermarkets inquiry on Tuesday, when the grocery giant was grilled on its relationship with suppliers during a period of increasing profit margins for the company.

The $36 billion food retailer used the prior day’s hearing to claim the supermarket industry was particularly competitive, despite it and Coles dominating with a combined 67 per cent market share.

Pressed on rebates – a percentage of suppliers’ sales they had to remit back to the supermarkets to fund promotions – former Woolworths managing director Natalie Davis said she never specifically considered them in her time in the job.

Asked directly if she even had a good understanding of the rebates, Davis replied: “No.”

Australian Competition and Consumer Commission deputy chair Mick Keogh questioned how Ms Davis, who is now the chief executive of Ramsay Health Care, could be signing off on profitability bonuses without knowing what role rebates were playing.

“Doesn’t that mean there would be good information flowing through to you about profitability which, of course, incorporates the extent to which rebates are funding things like sales?” he asked.

The commission’s interim report noted some suppliers had raised the issue of being required to pay rebates to supermarkets to finance specials or to receive quicker payments from the grocery chains.

Counsel assisting the inquiry Naomi Sharp’s eyebrows were also raised by Woolworths’ wording when it said it “only” accessed 20 to 25 per cent of Australia’s fresh fruit and vegetable supply.

“If you look at the total, out of the 6.5 million tonnes of fruit and veg grown in Australia, we’re just under 20 per cent of it,” former Woolworths chief executive Brad Banducci said.

“It doesn’t mean we’re not important (to the industry), it doesn’t mean our suppliers are not critical to us and to our customers, but it’s a very different number to often the numbers you see quoted.”

On Monday, Woolworths defended “shrinkflation” on home brands while saying it did not want an active role in notifying shoppers when it occurred.

The practice, also known as package downsizing, happens when product lines decrease in size while the price stays the same, helping brands maintain margin and profitability.

New chief executive Amanda Bardwell said she did not want Woolworths to add in-store or online notices to products to tell customers when shrinkflation occurred, despite a similar requirement being in force in France since July.

Customers wanted things as simple as possible and unit pricing already needed to be shown on tickets, she said.

The commission’s final report is due in February.

The watchdog is separately taking legal action against the two biggest retailers, accusing them of misleading customers with fake discounts.

-AAP

Topics: Woolworths
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