How expensive is that cheap product?

By Lou Heinrich | 30 Sep 15

Supermarket Monsters | Malcolm Knox | Black Inc

The man behind the checkout is tall with a grey goatee, and stoops as if used to bending to listen. Every day, he drives 40 minutes to get to work – but wouldn’t have it any other way, as he’s worked at this family-owned grocery store for almost 20 years.

As he weighs a bag of apples, I tell him about Supermarket Monsters, Malcolm Knox’s damning expose of big supermarkets’ terrible tactics. He counts the avocados as I list the joint sins of Coles and Woolworths. He doesn’t seem surprised.

“An example of squeezing a small business,” he says, scanning 1L of milk, “would be margarine. We have tried and tried to get Nutellex but we can’t! Customers ask for it all the time but we just can’t get it.” He sighs as he hands me my bag.

“They’ve got contracts with the big supermarkets.”

An exclusive contract is just one example of the way Woolworths and Coles adversely impact the grocery industry. Their combined size gives them unprecedented power in the Australian marketplace. Together, the two supermarkets employ 400,000 people; Coles’ annual profit is $2.7 billion, and Woolworths’ $2.5 billion.

While technically competitors, each mimics the other’s tactics, and the duopoly deliberately uses its combined might to hold sway in the grocery industry.

The Nutellex quandary at my local fruit and veg store is one of the many ways Woolworths and Coles have changed the landscape of supermarkets in the last 30 years. In Supermarket Monsters, Knox interviews the Nikitaras brothers, three men who own Hill Street Grocers in West Hobart.

In order for the brothers to sell good produce, they find micro-growers and distribute the fresh produce themselves – it’s proved too hard to negotiate with suppliers who also look after the supermarkets.

It’s clear that a contract with Coles or Woolworths means big money for a grower. But it also means big compromise – agreements can detail exclusivity, often to the extreme. A grower told Knox that he was contractually obliged to grow a maximum order; – yet when Woolworths only ordered three quarters of the amount, he was forced to destroy the rest.

“The control of suppliers doesn’t end there. Two of the supermarket giants’ most well known sins have been supplier rebates and $1 milk.”

This brutish business sense has also, through the widespread scale of its adoption, changed the way Australian food is produced. “The supermarkets have exact specifications for the fruit and vegetables they want,” Marco Nikitaras told Knox, “and if they don’t want them, the growers won’t grow them.”

This means that the diversity of food available has dropped; the only bean variety sold fresh in the major supermarkets is French beans, even though thousands of varieties exist. If Coles and Woolworths don’t want to sell broad beans and lima beans, they won’t be widely available to consumers.

The control of suppliers doesn’t end there. Two of the supermarket giants’ most well known sins have been supplier rebates and $1 milk.

Supplier rebates are a tool that Woolworths and Coles use to transfer profit from the suppliers to their own pockets. In 2014, Woolworths ran a healthy eating marketing campaign led by Jamie Oliver. With the poor reasoning that the promotion would result in extra sales, the supermarket requested fruit and vegetable growers to contribute to the cost: 40c per crate. An unfair manoeuvre, certainly, and a mandatory requirement to boot.

The chief executive of Australia’s fruit and vegetable growers’ organisation, AUSVEG, told the ABC: “I don’t know of any grower that values their business that’s been willing to decline the request.” A manager of a supply company told Knox, “The implied threat is that some of my products will no longer be stocked if I don’t pay up.”

Similarly, when Coles and Woolworths began selling 2L of milk for $1, Australian dairy farmers carried the cost. “Thirty years ago Australia had 30,000 dairy farms, of which 75 per cent were family-owned, employing 60,000 people,” Knox writes.

“Now it has 7,500 farms, the majority owned by foreign companies, employing 21,000 workers.” The lowering of pricing, in turn, causes surviving farmers to cut costs in their practices, which results in a lower-quality product.

And it’s not just suppliers who are treated as collateral damage. Both Woolworths and Coles pay their staff low wages, tolerate toxic management culture in some stores, and most shockingly, fight court compensation cases with their huge legal might.

This impacts both customers and workers. Knox tells the story of Mario Sisko, who worked for Woolworths for 16 years. Following a huge workload and company bullying, he attempted suicide, and later claimed workers compensation for psychological injury. The company spent far more than his eventual payout ($150,000) fighting his claims in court – which, justly, it lost.

Similarly, Maria Haleluka, a middle-aged nurse, was squatting at a low shelf in a Coles aisle when an employee hit her with a fully loaded trolley. The company was ordered by the District Court to pay her almost $500,000, but it denied liability and set private investigators on her trail. In another case, Coles spent 10 years defending against a woman who alleged she was assaulted by security guards.

These fights seem ridiculous considering the gargantuan size of these companies. In examining the motivations of the supermarket giants, Knox claims that these legal tactics are designed to intimidate and bully the weak.

The control of suppliers, the unfair rebates, and the disregard for legal rights make it clear that the Coles and Woolworths of this world care not for the individual, but ultimately for their shareholders. They are motivated by profit, and they are only getting bigger.

Supermarket Monsters is an easy-to-read documentation of the sins of the supermarkets. Knox’s journalism gives historical and political context to the corporations’ ascent to such power, and he lends a human face to the suffering they cause.

Ultimately, the book asks, what does our weekly shop really cost? And how expensive is that cheap product?

Supermarket Monsters: The Price of Coles’ and Woolworths’ Dominance, is now available from Black Inc.

Lou Heinrich is a fledgling literary critic and proud book nerd who writes about pop culture and women. You can find her on Twitter here