Fast food giant McDonald’s has been under a cloud in recent years as its US customers turn to alternatives. In this “Fast food reinvented” series we explore what the food sector is doing to keep customers hooked and sales rising.
Australia’s two main supermarket chains Coles and Woolworths’ representation of “fresh” and “local” food reflects heightened interest among consumers about these values. But they also contribute to concerns about food production and the supply chain.
Both have employed celebrity chefs with a reputation for caring about such matters. When he joined forces with Woolworths, UK chef Jamie Oliver explained:
part of what I’m doing with Woolies is looking at standards, and ethics, of where our sort of food comes from.
But when pressed on the demands Woolworths had made for farmers to surrender some of their profits to pay for his campaign, Oliver said he was just an employee.
The problem is that his claims and the supermarket’s promotion suggest that standards and ethics – as well as the growers asked to fund messages about themselves – are well regarded by the public. This is due, in part, to the strategies of producers and small retailers that the two supermarkets have appropriated to win the custom of consumers who care where their food comes from.
Private labels
Consider the case of Macro foods: the chain, rebadged as Thomas Dux, an urban store format, was a shift from the freestanding supermarkets established in the 1960s. When it was bought out by Woolworths in 2009, Macro founder Pierce Cody saw the sale of the chain as evidence of the work they put in:
to take organic to a large-format, mainstream model rather than little folksy corner stores.
The chain was used to test the market for Woolworths’ privately labelled gourmet goods. And Coles has its own organic label.
The proliferation of privately labelled goods (which are made by one company for offer under another company’s label) has diminished the product range offered by supermarkets. Coles’ product range, for instance, dropped by 11% between 2010 and 2012.
Private-label items, produced in conjunction with specific suppliers, compete directly with other products in the range, dominating shelf space and usually offering a lower price. And this is only one part of the pincer movement reducing the number of suppliers.
Australia’s largest dairy company, Devondale Murray-Goulburn, may grow from the exclusive deal it has struck with Coles to provide milk, for instance, but in the process it reduces the number of milk suppliers in the market.
A fairer go for farmers
Supermarkets use the romantic image of the small family farm to play up their close relationship with farmers and suppliers. But it’s also employed in arguments for reforming the sector, because of the commercial disadvantage small family farms have in the domestic food system.
The Agricultural Competitiveness White Paper released earlier this year, for instance, recommends a new commissioner dedicated to agriculture and a more “farm savvy” Australian Competition and Consumer Commission (ACCC) to encourage fair trading.