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AFGC slams Coles' ‘Trojan horse’ tactic of own label discounting

By RJ Whitehead , 10-Jan-2013
Last updated on 10-Jan-2013 at 07:45 GMT

The Australian Food and Grocery Council (AFGC) has slammed a move by one of the country’s major supermarket chains to heavily discount its private label products, accusing it of deploying a “Trojan horse” tactic.

The supermarket announced this week that it had cut the price on more than 100 of its Down Down private label products, and extended discounts on Coles brand milk and bread at its Express stores. 

However, research by Deloitte Access Economics based on Coles’ own data has found that the supermarket’s product range has dropped by 11%, from 62,000 products to 55,000 over two years since mid-2010.

Smoke and mirrors

According to the council’s chief executive, Gary Dawson, the discounting policy might be seen as a result for consumers, however they are destined to lose once product choice is taken into account.

A loss of 7,000 products from a supermarket’s overall offering is a significant reduction in the range of choices available to consumers”, Dawson said.

These figures confirm what shoppers report anecdotally—that they often can’t find their favourite products on the shelves any more when they go to the major supermarkets.

He said reducing the range of products available would also decrease competition which could result in greater market power for the supermarket giants.

This is a classic Trojan horse tactic: disguising a longer-run loss of choice for consumers. And as the range of choices drops, so does competition, raising the risk that in the longer run supermarkets will have more market power to increase prices at will to protect already high profits.”

Coles hits back

Coles has responded quickly with its own statement, claiming that the AFGC “has selectively used data from a Deloitte report to pursue a tired political campaign against the major supermarkets.

Unfortunately, the AFGC have ignored the detailed Deloitte analysis about why and what has happened in Coles’ supermarkets, and the Deloitte conclusion because it does not suit their story. The Deloitte report concludes: ‘…effective choice in the store is still high and consumers may be better off overall’.”

Coles’ merchandise director, John Durkan, said customers would ultimately decide what products they wanted to buy and could simply shop elsewhere if supermarkets did not stock what they wanted.

It is about time the AFGC became a more professional body that actually represents all of its members, many of whom have seen substantial sales gains from products sold at Coles that customers buy the most,” he said.