Foster’s steps up fight against discounting by supermarket giants

Coles and Woolworths should remember that infuriating suppliers by cutting retail prices and pushing their private-label products will hurt supplier relationships and damage their standing in the eyes of the public, a retail expert says.

Relations between Foster’s and Woolworths and Coles continue to sour, with the brewing giant recently refusing to supply VB, Carlton Draught and Pure Blonde beers to the supermarket giants on fears they would sell the slabs below wholesale prices.

Fosters, which has complained that Woolworths and Coles were trying to sell their products too cheaply to lure customers into the supermarkets, has also reportedly asked staff to buy back bottles of its Penfolds Bin 389 wine to prevent the highly regarded wine being sold for $7 below the wholesale price.

Lisa Tartaglia of the Australian Centre for Retail Studies, says price wars have been going on in the grocery sector for some time but are now moving to unprecedented levels.

She cannot recall instances where suppliers have moved so openly against the supermarket giants.

“Coles and Woolowrths are so dominant in the market, and it’s almost like they’re going from one thing to the next,” Tartaglia told SmartCompany.

“And with a reputable brand like Foster’s, you don’t want to be undercutting suppliers.”

While cut-price products are a great way to increase store traffic and pressure competitors, she warns that the recent controversy over Coles’ decision to price one litre of milk at $1 showed that “consumers have a heart for suppliers”.

But Tartaglia says while it’s laudable to stick up for your product, removing your products from the largest markets is a risky strategy.

Woolworths and Coles have also attracted the ire of independent Senator Nick Xenophon, who warns the pair could ultimately reduce competition if they use their “enormous market share to crush competitors”.

And in a warning set to capture the heart of the nation’s drinkers, he added their actions could increase beer prices in the long-term if competition in the beer sector is reduced.

Foster’s could not be contacted for comment this morning.