**Australia**: Coles has mandated suppliers to sign a freight recovery agreement as part of a new range strategy. The move, aimed at increasing profitability, has sparked criticism for its potential negative effects on small producers as the supermarket aims to streamline its offerings and enhance customer experience.
Coles has introduced a requirement for suppliers wishing to have their products included in the supermarket’s new range to sign a freight recovery agreement, a move aimed at boosting the company’s profitability. This directive was outlined in a communication sent to suppliers on 21 February, which detailed the supermarket’s intentions for a major range review that Coles claims will enhance customer experience by introducing “meaningful new lines” to “excite and delight” shoppers.
The decision follows Coles’ previous announcement to eliminate approximately 2,500 products, a measure attributed to a strategy intended to simplify its offerings. However, this decision has elicited criticism from industry leaders such as David Littleproud, leader of the Nationals, who contends that the measure adversely affects small-scale producers.
Under the new freight policy, suppliers are informed that they will be responsible for the transport costs associated with delivering goods into Coles’ national distribution centres. Coles plans to take “control of transport” from these centres to regional distribution centres, which serve as storage points before products are dispatched to individual stores.
A spokesperson for Coles stated that traditionally, the delivery costs incurred when transporting products to distribution centres have been borne by the suppliers. The representative emphasised that the supermarket does not generate profit from these freight recovery charges, asserting instead that the process provides a “more cost-effective and environmentally friendly way” for suppliers to deliver their products. They further clarified that only slow-moving, shelf-stable items, such as boot polish and hair care products, are kept in the national distribution centres.
The specifics of the freight charges were not disclosed, with the spokesperson mentioning that the rates are assessed weekly based on dispatched goods and reviewed on an annual basis. Senator Nick McKim, the Greens’ treasury spokesperson, has described the policy as a “blatant abuse of power”, claiming it disproportionately affects smaller suppliers and exemplifies how the major supermarket chains exploit their market position. McKim stated, “They shift costs on to suppliers and protect their own profits.”
Additionally, the potential impact of Coles’ new arrangements on smaller producers has been highlighted. New South Wales honey packer Tori Rutherford recently voiced her concerns after being informed that one of her products, the Adleys Honey 400g squeeze bottle, would be removed from Coles’ inventory as part of the product culling process.
Coles appears to be strategically prioritising its own-brand products, which has raised questions regarding fairness when compared to its plans to discontinue a significant number of other brands. Responding to inquiries about this strategy, the supermarket dismissed concerns, stating, “We reject the premise of this question,” and highlighted that all product lines, including their own brands, are subjected to reviews.
In tandem with the new freight policy, Coles also aims to leverage shopper purchasing data to create tailored store layouts through advanced analytics of consumer behaviour. Bronwyn Thompson, a sales strategist experienced with major brands, acknowledged the ethical questions surrounding customer data collection, particularly regarding consumers’ choices in participating in loyalty programmes and related schemes. Thompson remarked on the pressing nature of how supermarkets entice customers into their offerings, stating, “It’s more how much they’re working to push you into their schemes.”
Coles reported an increase in supermarket sales revenue, reaching $20.6 billion over the six months ending in 2024, reflecting a 4.3% growth according to their recent half-yearly financial results.
Source: Noah Wire Services
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