Fast food giant McDonald’s has been under a cloud in recent years as its US customers turn to alternatives. In this “Fast food reinvented” series we explore what the food sector is doing to keep customers hooked and sales rising.
Australia’s two main supermarket chains Coles and Woolworths’ representation of “fresh” and “local” food reflects heightened interest among consumers about these values. But they also contribute to concerns about food production and the supply chain.
Both have employed celebrity chefs with a reputation for caring about such matters. When he joined forces with Woolworths, UK chef Jamie Oliver explained:
part of what I’m doing with Woolies is looking at standards, and ethics, of where our sort of food comes from.
But when pressed on the demands Woolworths had made for farmers to surrender some of their profits to pay for his campaign, Oliver said he was just an employee.
The problem is that his claims and the supermarket’s promotion suggest that standards and ethics – as well as the growers asked to fund messages about themselves – are well regarded by the public. This is due, in part, to the strategies of producers and small retailers that the two supermarkets have appropriated to win the custom of consumers who care where their food comes from.
Consider the case of Macro foods: the chain, rebadged as Thomas Dux, an urban store format, was a shift from the freestanding supermarkets established in the 1960s. When it was bought out by Woolworths in 2009, Macro founder Pierce Cody saw the sale of the chain as evidence of the work they put in:
to take organic to a large-format, mainstream model rather than little folksy corner stores.
The chain was used to test the market for Woolworths’ privately labelled gourmet goods. And Coles has its own organic label.
The proliferation of privately labelled goods (which are made by one company for offer under another company’s label) has diminished the product range offered by supermarkets. Coles’ product range, for instance, dropped by 11% between 2010 and 2012.
Private-label items, produced in conjunction with specific suppliers, compete directly with other products in the range, dominating shelf space and usually offering a lower price. And this is only one part of the pincer movement reducing the number of suppliers.
Australia’s largest dairy company, Devondale Murray-Goulburn, may grow from the exclusive deal it has struck with Coles to provide milk, for instance, but in the process it reduces the number of milk suppliers in the market.
A fairer go for farmers
Supermarkets use the romantic image of the small family farm to play up their close relationship with farmers and suppliers. But it’s also employed in arguments for reforming the sector, because of the commercial disadvantage small family farms have in the domestic food system.
The Agricultural Competitiveness White Paper released earlier this year, for instance, recommends a new commissioner dedicated to agriculture and a more “farm savvy” Australian Competition and Consumer Commission (ACCC) to encourage fair trading.
The aim is to strengthen competition in agricultural supply chains, which will engage the ACCC more directly with supermarkets. And the first priority is to help farmers achieve a better return for their produce. But this is only one sign that Woolworths and Coles face a political environment that is increasingly hostile to their sourcing policies (as well as growing consumer scrutiny).
The code of conduct for grocery wholesalers and retailers (Food and Grocery Code), for instance, discloses the existence of practices by grocery retailers and wholesalers in their dealings with suppliers, which motivated its development. It mentions “preventing a supplier from fulfilling obligations” by placing their products behind other competitors’ products on shelves such that consumers cannot see them, and “payment for wastage” that occurs at the retailer’s premises.
While the code fails to address the inequality of market power in the supply chain, it does reflect the challenging environment in which Australian farmers and suppliers now operate.
Marketing by supermarket giants highlights public interest in food production, supply and retailing. When Woolworths brought back its “Fresh Food People” campaign last year, the advertising featured a range of products from farm to store complete with “fresh food stories” of individual farmers.
But the UBS Supermarket Supplier Survey tells a different story; Woolworths’ rating on quality of fresh food produce lags behind Coles.
Besides selling the brand of Woolworths, the marketing also appropriates the ideal of farming and relationships with suppliers to sell products. The company considered a “local” retail brand in 2013, in addition to its other labels such as Macro and Woolworths Select.
This suggests Woolworths still believes it can increase or maintain its market share with buzzwords despite how incongruous these sound coming from a supermarket giant. But while local might be more important to consumers than fresh, supermarkets are falling behind the innovations of local food producers to create a fairer food system.
Coming out on top
Supermarkets have tried to tailor their products to include organic, natural and local foods to meet consumer demand. But while Coles and Woolworths control 80% of the grocery market, they have 45.5% of the market in fruit and vegetables and 47.2% of meat.
The imbalance in market power favours the duopoly. But eaters are still choosing to buy their fresh food at local fruit and vegetable shops, butchers and farmers’ markets. There, they can engage directly with the people who grow their food and not just see representations of them.
A survey undertaken last year on behalf of the Australian Farmers’ Markets Association, for instance, found that 14% of respondents typically buy their vegetables at a farmers’ market.
Supermarkets have stopped merely copying each other: from liquor to petrol to hardware. It’s clear from sales, from how they advertise and from consumer concern about food security and food sovereignty that what they really need to worry about is the combined agency of farmers and the power of consumers. Put together, the story isn’t so gloomy for the food sector.
This article originally appeared on The Conversation.