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Maple Street Co-op News Articles of Particular Relevance

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From Maple Street Co-op News, February/March 2004
Published by Maple Street Co-op, 37 Maple Street, Maleny Qld 4552, tel 5494 2088
website http://www.maplestreetco-op.com.au

We Won't Shop There - or There!

by Lori Sturtz

Building X is a huge, mysterious, sealed structure that looms above Flemington Markets in Melbourne.  Boom gates protect its entrance as security guards patrol the premises, and all are under constant video surveillance.  This is not some government building or secret US military structure.  It is the high-tech centre of the Woolworths fresh-food distribution system.
 
The loading area is the size of three football fields and processes 25,000 boxes of fruit and vegetables every day.  The temperature never rises above 14°C and sensitive produce is cooled to about 2°C.  Apples are kept at 8°C in a vast coolroom of their own.  There are about 80 staff and they are always dressed for winter.  Electric forklifts deliver produce through automatically opening plastic doors that separate the coolrooms from the loading area.  The produce undergoes immediate quality assessment and is sent back if it does not fit Woolworths' specifications.  Staff take digital photos of rejected produce and email these to the growers within hours.  This gives a whole new meaning to the expression, "The Fresh Food People"!
 
Many farmers are angry about the growing influence that Woolworths and Coles have over them.  Woolworths buys 25% of all the fruit and vegetables grown in Australia and 15% of the meat produced for its 680 supermarkets.  It had record sales around $21 billion this past fiscal year and profits of just under $651 million.  Coles and its counterpart Bi-Lo have more than 520 supermarkets and sales of about $16 billion a year.  They are so powerful that most of their suppliers were unwilling to comment on their dealings when contacted by the Sydney Morning Herald in July 2002.  Some analysts say that even multinationals such as Nestlé and Kelloggs are careful not to upset them.

Australians are eating poorer-tasting fruit and vegetables that have been treated with increasing levels of chemicals due to Woolworths' extremely stringent quality specifications.  Growers are having to use more and more pesticides and fungicides in order to reduce blemishes.  Woolworths and Coles influence what happens to produce from the time the seeds are planted.  They are able to track when it was harvested, who picked it, what batch it came from and the temperature during storage and transportation phases.
 
Steve Twomey of Vitor Marketing in Renmark, SA, says that these quality demands have led to new varieties of citrus being planted.  "We now replace 3% of our trees every year," he says.  These new varieties are larger and shinier but they do not taste any better.  He also says that Woolies rejects fruit "if it has three square centimetres of its surface blemished, because they think consumers won't buy marked citrus - even though the fruit is identical under the skin".  Mr Twomey said that more than half of Vitor's 50,000 tonnes of produce was now exported because "Woolies are too hard to deal with".  He also said that Coles is not as stringent but is "definitely moving in that direction".
 
Philip Andreatta, a grape grower in Griffith, NSW, supplied a local Woolworths with 30% of his grapes for 12 years, on the understanding that he should get the same price that he receives at the markets.  In return, he complied with Woolies' compulsory quality assurance scheme.  He had to take a three-day training course at his own expense, he pays $1,200 annually in auditing costs and $600 a year in associated insurance costs, and spends about an hour a day filling out documents for the supermarket.  He is now getting less money from Woolies for his grapes than he gets at the markets, but the supermarket is unwilling to pay more.  Even though he says he'd do better to sell all his grapes at the markets, he feels he has spent a lot of time and money to comply with the supermarket's scheme and has been told that if he lets his accreditation lapse it will be harder to get approved next time.
 
Lester Donges, a former cherry grower from Young, NSW, told the Sydney Morning Herald that "The supermarket system is destroying the fruit and vegetable industry in this country".

Anti-competitive conduct and pricing

Alan McKenzie, spokesperson for the National Association of Retail Grocers of Australia (NARGA), was interviewed by Stephen Long on ABC Radio on 26 August 2003.  He said that Woolworths and Coles Myer have the highest grocery retail market concentration in the world, approaching an unparalleled 80%; their control of petrol is about 30%, and liquor is 30-40% of the market.  In the UK, the three biggest supermarkets control less than 50% of the market; in the US, the top three control less than 25%.  Nowhere else in the world do they have 30% of the petrol market.  Some critics say that these lower prices won't be sustained once they squeeze suppliers' margins and force competitors out of business.

NARGA issued a media release on 17 December 2003 that announced how a recent High Court decision has dealt a fatal blow to the misuse of market power provision (section 46) of the Trade Practices Act.
Mr McKenzie writes:  "There can be no doubt that the latest decision confirms that the High Court has taken an unduly narrow view of section 46, a view that does not do justice to the parliamentary intention behind the provision."
 
He goes on to state:  "Effective laws deterring abuses of market power are critical to the promotion of competition for the benefit of consumers.  Unless the abuse of market power is prevented, efficient smaller players can be destroyed by larger and more powerful players with their deeper pockets and every interest in protecting any inefficient practices."

He concludes:  "Given that a firm could engage in the same below-cost pricing or other potentially anti-competitive conduct, with or without market power, it is clear that in the High Court's interpretation of the key concept of taking advantage, there are few, if any, types of conduct that will be caught by s46, simply because such conduct can be engaged in by firms with or without market power."

Section 46 of the Trade Practices Act allows a company to fix prices below cost in order to eliminate competitors if that company does not have substantial market power.
 
Woolworths spent over $10 million fighting the Australian Competition and Consumer Commission (ACCC) in a Victorian Court over price fixing and misuse of power.  One of its Safeway stores had stopped Tip Top bakeries from selling factory seconds and discounts at a stall at Preston Markets.  Supermarket suppliers dropped Tip Top until small retailers ceased discounting.  Woolworths CEO Roger Corbett commented:  "We don't deliberately undercut our small competitors."  If this case goes to the High Court, it will probably be overturned because they will be able to say that Safeway did not have substantial market power.
 
Federal Labor has said that it will amend the Trade Practices Act to prohibit predatory pricing.  It highlighted the recent High Court rulings as weaknesses of the Act in dealing with predatory pricing, and cited section 50 of the Canadian Competition Act as one approach worth considering.  This ruling prohibits firms from "selling products at unreasonably low prices, having the effect or tendency of substantially lessening competition or eliminating a competitor, or designed to have that effect".  The Australian Democrats have been advocating amending the Trade Practices Act for quite a while now and are delighted that Labor sees the virtue of this policy position.

The ACCC announced in June 2003 that it was taking action in the Federal Court of New South Wales against Woolworths and Coles for anti-competitive conduct pertaining to their liquor operations.  The ACCC accused the supermarket giants of preventing smaller operators from opening bottle shops, constructing driveways or advertising takeaway alcohol.
 
A wine shop in Katoomba was stopped from having a window display and from expanding its range, and a beer retailer was not allowed to stock the same beer as the supermarkets.  The supermarkets made objections when each of these businesses had applied for a liquor licence, but withdrew them when the operators agreed to the above restrictions.
 
And in 1999, the Northern Territory's Liquor Board was told that some people in Alice Springs were boycotting Woolworths because they believed the store was not co-operating in addressing liquor problems.  Woolies was challenging a Liquor Commission proposal to cut alcohol trading hours in Katherine.  One study found that Katherine had 70% more alcohol consumption per capita than the national average.
 
Woolies targets pharmacies

Woolworths' next move is into the pharmacy market.  According to John Bronger, national president of the Pharmacy Guild of Australia (PGA), "The issue of greatest concern is that Woolworths is clearly not interested in providing the community with a service:  it is interested in moving large volumes of stock".  He says that overseas examples show that pharmacies within supermarkets are used as 'loss leaders'.  This means that they sell at or below cost in order to develop a consumer base, and then they allow the prices to creep up when the competitors are gone, leaving local businesses and consumers as the losers.
 
Mr Bronger believes that "consumers do not want a supermarket environment in which to shop for medications.  You might have a rash that you're embarrassed about, and you don't really want to stand up in the middle of the supermarket and say, 'I've got this rash on my butt'." There is usually a quiet area off to the side at pharmacies.
 
Another issue is that Woolies makes a lot of its profits from tobacco and liquor sales, and so Mr Bronger cannot believe that Woolworths is really serious about wanting to provide any kind of health service to its customers.

A consumer revolution at home

This is a pretty big monster that Maleny is trying to stop; and although giants have been known to fall, we must all face the prospect that this monstrosity may become reality very soon.  However, this does not mean that the war has been lost.  After all, the power does remain with us and always will.  We are the buying public and we choose where and with whom we do business.  Really, the only way to send our message loud and clear is by not shopping there.  We must put our money where our mouths are and support our local producers and merchants.
 
Patrick Holden, director of the Soil Association in the UK, told Radio National back in 2000 that there is a consumer revolution happening in many parts of the world.  The demand for organic food is increasing, as consumers demand safer, higher-quality, better-tasting food without chemical residues and express their concerns about sustainability, the environment and animal welfare.  Mr Holden said that in this world of vast globalisation, people feel disempowered.  Supporting the organic market is one way people can have a powerful influence on the future of agriculture.
 
So use that power and shop at the Maple Street Co-op!  We support many local growers and have done so for more than 20 years.  When you buy from us, you are supporting your neighbours - people like the Chattertons, Felkins, Lightbodys, McDonalds, Newtons, O'Connors, Stevens, Walkers, Wightmans and Woodlands.  There have been many, many more consignors over the years and there will be many more to come.  We support the organic industry with its traditional, eco-friendly agriculture that fosters lots of smaller-scale farms and helps money stay in communities.  We also support small organic businesses such as United Organics at the Brisbane Markets.  The group has good, strong relationships with its growers and offers them fair prices for their produce - unlike many in the agribusiness sector.
 
Many people believe that they cannot afford to shop at the Co-op.  However, some may be quite surprised to learn just how many people do so on very limited incomes.  Some of our biggest-spending customers, and our most loyal, are pensioners (aged, single parent and unemployed).  Think of the expense as taxes well spent!  Since we are a non-profit co-operative, you have the bonus of knowing that your money is not lining the pockets of wealthy Woolworths directors.
 
Sure, Woolies has Australian 'mum and dad' shareholders, but most of the money does not end up with them.  It never does.  Woolies sells many products of huge corporations that are powers unto themselves and have even become more powerful than many countries, evading taxes and contributing to the unregulated currency transactions of over a trillion US dollars that float around the planet every day.  Most of these products are heavily processed junk foods are products of multinational companies and cost much more money in the long term than healthy, whole foods.  It is surprising how little it can actually cost to eat well.

So spend your money where it will make a big difference:  supporting local organic producers and munching on healthy, organic food!

References:

  • Matt Wade, "Woolies plays fair - 'and there's room for all', says chief", Sydney Morning Herald, 11 July 2002
  • Matt Wade and Michael Bradley, "Woolies:  the worm in that plastic fruit", SMH, 9 July 2002
  • Michael Bradley, "Farmers say big two are leaving them in a jam", SMH, 9 July 2002
  • Matt Wade, "Green Giants are Gobbling Up the Little Growers", SMH, 8 July 2002
  • Alan McKenzie, interviewed by Stephen Long, ABC Radio, PM, 26 August 2003
  • NARGA media releases, 11 August, 18 November, 17 December 2003, http://www.narga.com.au
  • ABC Business Breakfast, transcript (re Safeway and Tip Top), 1 July 2003, http://www.abc.net.au/businessbreakfast
  • Australian Competition and Consumer Commission, http://www.accc.gov.au
  • Jasmine Smith, "Pharmacists told to fight Woolworths bid", Food Week, 15 September 2003
  • Patrick Holden, interview on ABC Radio National's Background Briefing, 30 April 2000

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