Woolworths pumps private labels once again, but grocery industry still pushing back

Woolworths says the supermarket’s shift to private labels is “irreversible”, and that sales of home-grown brands are growing two to three times faster than other products.

But the Australian food and grocery industry is still fighting back, with the industry association telling SmartCompany in a statement it still supports an industry code which would stop discriminating against companies in favour of private labels.

In an interview with The Australian Financial Review, Woolworths managing director Tjeerd Jegen said total sales of the Woolworths house brands have increased by low double digits this year, arguing consumers are “voting with their feet”.

“Our approach is very simple.?.?. we only launch it if we feel it fills customer needs and it has to justify itself on the shelves. If it fails, we take it off,” he said.

He also argued demands from suppliers that the supermarket stops its buying teams from using supplier information to develop or promote private label products are “unworkable”.

“We want the best offer in the category and it doesn’t matter if it’s branded or private label. We want one person deciding that, not several.”

The comments are only the latest argument in a series of verbal battles between the supermarkets, suppliers which argue they feel increasingly shut out of the industry, and the Australian Competition and Consumer Commission.

ACCC chairman Rod Sims has said the regulator expects to take action on these concerns by the end of the year.

In a statement, the Australian Food and Grocery Council told SmartCompany today any industry code needs to be effective and enforceable by the ACCC, and must touch on key points including persistent demand for additional payments from suppliers.

Other points include “failure to pay prices agreed with suppliers”, and “conduct discriminating in favour of home brand products”.

Last week, Sims told the National Press Club that supermarkets must ensure they aren’t “running the risk of misusing your market power for the purpose of damaging competition”.

“That has to be watched very carefully and that’s something we’re working on and probably about all I should say on that now.”

Suppliers have been increasing their opposition to the supermarket private-label push, with several having collapsed in the past few years.