Exclusive: Coles says plan ‘benefits suppliers’ but senator Nick McKim calls move ‘blatant abuse of power’ that will ‘hit smaller suppliers hardest’
- Sign up for Guardian Australia’s breaking news email
Coles has told suppliers they must sign an agreement to pay for freight costs if they want their products to be stocked in the company’s new range, as the supermarket looks to increase its profits.
The company has detailed the plans in a brief sent to suppliers, seen by Guardian Australia, alerting them to a “major” range review, which Coles says will allow it to “implement meaningful new lines” of products to “excite and delight” customers.
Coles previously announced it would cull about 2,500 products, a decision it said was about “simplifying” its range, but which the Nationals leader, David Littleproud, said is failing small producers.
Now, a briefing note and accompanying presentation sent to suppliers on 21 February has revealed more about the way Coles operates.
The note said “suppliers will be required to sign a freight recovery agreement to participate in the new range”.
If products are to be delivered into Coles’ national distribution centres, the supplier will be charged the cost of transport to its regional distribution centres.
According to the policy, Coles will “take control of transport” from its national distribution centres to its regional distribution centres – which is where products are kept before they are taken to stores to be sold.
A spokesperson for the supermarket said the cost of delivering products to its distribution centres had “always been borne by the supplier”.
The Coles spokesperson said the supermarket “does not profit from freight recovery” and the process “benefits suppliers” by “providing a more cost-effective and environmentally friendly way of delivering their product”.
They said “only slow-moving, ambient products” were stored in the national distribution centres. The examples they gave were boot polish, hair and beauty products and “international products”.
They would not disclose how much suppliers were charged, saying only that freight rates were “calculated weekly as goods are dispatched” and reviewed annually.
The Greens treasury spokesperson, Senator Nick McKim, said charging suppliers freight costs was a “blatant abuse of power” that he said would “hit smaller suppliers hardest”.
“This is a textbook example of how the obscenely profitable supermarket duopoly exploits its dominance,” McKim said. “They shift costs on to suppliers and protect their own profits”.
Guardian Australia asked Woolworths if it charged suppliers freight costs, but the supermarket declined to comment.
Last week, New South Wales honey packer Tori Rutherford spoke out about Coles after the supermarket told her it would delete one of her products – the Adleys Honey 400g squeeze bottle – as part of its cull.
The presentation sent to suppliers on 21 February reveals the supermarket intends to “drive” its own-brand products as part of its major range review, to give it a “strategic differentiator” to its competitors.
Asked if Coles considered it fair to promote, or sell more of, its own-brand products while culling thousands of others, the supermarket said: “We reject the premise of this question”.
“We review our own-brand range just as we do all products in the supermarket,” a spokesperson said.
Coles also told suppliers it will take a range of factors into consideration when deciding whether to continue stocking their products, including whether they are “experiencing unsustainably high rates of theft”.
Along with the new freight policy, Coles also plans to use shoppers’ purchasing data to generate “unique” store layouts for different stores, through “advanced analytics of customer behaviour”.
Bronwyn Thompson, a sales strategist who has worked for major household brands, said there were “absolutely” ethical questions about collecting customers’ data, including whether people had the choice of whether or not to participate.
But Thompson said she viewed the different ways the supermarkets “put pressure” on customers by trying to entice them into joining their loyalty programs and buying petrol from associated outlets as a bigger issue.
“It’s more how much they’re working to push you into their schemes,” she said. “The ethics are: who is able to participate? It’s going to be wealthier, higher-spend households.”
Coles grew its supermarket sales revenue by 4.3% to $20.6bn over the last six months of 2024, according to half-yearly financial results released last week.