WHO Can Provide Farmgate To Supermarket Transparency?

In June there was anger in Brisbane at Winter Veg Marked Up 250% and hope that the recently released ACCC inquiry into grocery prices would clarify the situation, unfortunately it just seems to have muddied the waters.

It appears the relationship between farmgate and shelf prices was not investigated. WHY NOT?

And sadly, do the bulk of Australians care?

It seems one stop shopping is just too easy, people are time poor and it’s only a small minority that take the time to think about the supply chain, sustainability, the conditions of overseas workers…

What the Courier Mail Had To Say – Winter Veg Marked Up 250%”>15 June 2008

“The two retail giants say their profit margins on fresh food are small and the prices reflect costs such as transport and distribution, spoilage, staffing and rental.

But the scale of the mark-up on staple foods has angered consumers and growers.

Sunshine Coast shopper – and retired fruit and vegetable retailer – Gordon Shipley said he was stunned to see brown onions advertised in Woolworths at the Currimundi Marketplace shopping centre for $3.42 per kilo – a mark-up of nearly 250 per cent on the Rocklea markets wholesale price in Brisbane.

“This is not about high fuel prices, or any distance from wholesalers, it is pure greed,” said Mr Shipley, who has 35 years’ experience in the fresh produce business.

John Cherry, chief executive officer of Queensland Federated Farmers, said supermarket prices were unreasonable.

“There’s a lack of transparency on what occurs along the chain from farm gate to supermarket,” he said.

He is hopeful that the current Australian Competition and Consumer Commission inquiry into grocery prices will shed some light on where the costs accumulate.

“The frustration of the inquiry was that a lot of growers were still too frightened to come forward and give evidence for fear of losing contracts,” Mr Cherry said.

Harry Manwaring, a fruit and vege wholesaler at Brisbane Markets for 22 years, said he couldn’t see any logical reason for such big differences between wholesale and retail prices.

He said farmers received between 65¢ and 70¢ per kilo for onions. Freight costs were about an extra 6¢ per kilo.”

And in Sydney…

The SMH On ‘Milking The Consumer’ – 11 August 2008

“Have supermarket prices for the likes of milk, eggs and meat really been rising at the same pace as prices at the farm gate? According to the Government’s inquiry into grocery prices the answer is “yes”.

According to a chorus of peak bodies, farmers and academics however the answer is a resounding “no”.

Accusations are rife that the ACCC report is a whitewash for the powerful supermarket duopoly. Even the language of the report reads like it was written by legal counsel for Woolworths and Coles, says chief of the Southern Sydney Retailers Association, Craig Kelly…

Kelly points to the “Gross value of Production” for market milk in 1999/00. “The farmers were getting $1011 million income for market milk. Yet in 2002/3 their income had fallen to $521 million.

“So the diary farmers lost $500 million income – but on average the retail price of milk continued to increase, and increase substantially faster than the CPI.”

NB I have looked but can’t find any reports online that list the likely/usual movements of a product like milk and the number of stakeholders involved between farm gate and supermarket shelf. Does such an animal exist I wonder?

Direct Store Delivery Processes In The US

While searching I DID find something new, ‘direct store delivery’ (DSD) reported 22 August 2008 by Australian Food News.

“Seventy-seven per cent of US-based retailers indicate that in 2008, they expect their use of direct store delivery processes (DSD) will increase or remain constant, representing a significant opportunity to drive sales growth, according to a study released by the Grocery Manufacturers Association (GMA).

DSD, which revolves around the supplier delivering directly to the retailer, has reportedly become increasingly prevalent as focus on more demand-driven supply chains is heightened.

The research, Powering Growth Through Direct Store Delivery – which was conducted by AMR Research and Clarkston Consulting, suggests retailers and manufacturers can derive benefit from the process. “Direct store delivery improvements represent manufacturer-customer collaboration at its finest,” claimed Stephen Sibert, GMA senior vice president of industry affairs. “This study indicates that both retailers and manufacturers are being rewarded for DSD innovations – from enhanced promotional effectiveness to increased brand and store loyalty.”

As evidence of the sales opportunity that DSD can create for retailers, the study suggests that sales of DSD products account for 24 per cent of unit sales and 52 per cent of retail profits in the grocery channel. Seven of the top ten largest grocery categories employ DSD, and these categories experienced a nearly 15 per cent growth in sales from 2003-2007.

By placing supplier representatives in the store, the DSD model not only helps ensure proper execution of trade promotions but also contributes 25 per cent of total store labor in the North American market. “DSD offers unparalleled capabilities to meet shoppers’ needs,” noted Ann Dozier, The Coca-Cola Company’s vice president, collaborative customer capabilities and chairman of the GMA Direct Store Delivery Committee. “By collaborating with DSD suppliers, retailers can maximize operations while delivering a unique shopper experience at every store.”

The analysis, based on quantitative and qualitative research of DSD and non-DSD company environments, is available for download at: www.gmabrands.com/publications/DSD_Report_FINAL_0808.pdf.”

Some new ideas for Australian suppliers and retailers?