Coles bid for Victorian lamb processor sparks more market power controversy

Supermarket giant Coles has been accused of threatening to withdraw its contract with Australia’s biggest lamb processor CRF should the company reject its takeover bid in favour of another party.

The Wesfarmers-owned supermarket giant has confirmed its bid for the Victorian company, whose decade-old supply contract is set to expire shortly.

The bid – reportedly worth between $12 million and $15 million – is believed to be Coles’ first attempt to buy a processing facility. It is said to be the only offer left on the table.

But reports suggest Coles could end up paying less for CRF than had previously been offered, after the supermarket chain allegedly threatened to put its supply agreement with CRF out to tender should another party succeed in buying it. Most of CRF’s sales go to Coles.

Coles spokesman Jim Cooper declined to comment on the allegations this morning, or the price of the company’s bid.

“The bid is not a precursor to a broader strategy of vertical integration,” Cooper told SmartCompany.

He said the bid made sense in this situation, but declined to comment what about this situation was attractive for Coles. 

The report comes amid concerns about the market power of supermarket giant Coles and Woolworths.

Coles in particular has been accused of squeezing dairy farmers by slicing the price of a litre of milk to $1. Beverages giant Foster’s also upped the ante against the big two, accusing them of selling key products for less than they should. Manufacturers have also complained about the growing number of house products sold at Coles and Woolworths.

The supermarket operators have consistently defended themselves by saying they are simply providing better value to customers.

A spokesperson for CRF, which is located in the Victorian regional town of Colac, was not available this morning.

Victorian Liberal MP Simon Ramsay, a CRF board member whose electorate covers Colac, and the South Australian independent senator Nick Xenophon have called for an inquiry into the sale.

And Nationals Senate leader Barnaby Joyce is quoted describing Coles’ conduct as the “local agent saying, ‘if you don’t sell me your property at half price, I’ll no longer sell your cattle – and I’m the only stock agent in the saleyards’”.

In a statement Coles said it has acted “appropriately and transparently at all times throughout the sale process”.  

“The decision to sell CRF was instigated by the CRF owners, not by Coles,” it said.

“Full details of Coles’ existing contractual arrangements with CRF were available to all bidders. Coles was not given preferential treatment in the sale process.

“Coles made a non-conditional bid for the business.

“Coles was not privy to the deliberations by the current owners of CRF about the competing bids

“The current CRF independent board have accepted the Coles bid, subject to shareholder approval and a number of other customary conditions.

“Coles believes that its bid for CRF is a positive outcome for the business and, if successful, will ensure the ongoing viability of the plant and its local employees.”