Woolworths and Coles ranked worst supermarkets for suppliers in major report

Woolworths and Coles have emerged as the top two worst-performing supermarkets among grocery suppliers in a recent comprehensive report, according to findings published by *The Sydney Morning Herald* and *The Age*. The report, conducted under the newly enforced federal government Food and Grocery Code of Conduct, reveals deep-seated concerns among suppliers regarding unfair pricing practices and the significant influence exerted by these two major retailers. The findings highlight a persistent struggle between suppliers and supermarkets, with the latter leveraging their market dominance to extract additional concessions from smaller businesses.

The survey, which gathered approximately 950 responses from suppliers, indicates that nearly half of the participants described price negotiations as particularly challenging. Many noted that retailers frequently demand further discounts during "range reviews," often pressuring suppliers to reduce their own profit margins. According to Professor Elizabeth Sarofim, the Food and Grocery Code supervisor, these negotiations are characterized as "difficult, opaque, and shaped by retailer margin demands." She emphasized that such practices pose a risk of transferring inflationary pressures onto suppliers, preventing them from adequately recovering rising input costs.

Aldi was consistently rated as the most fair and respectful supermarket for suppliers, followed by Metcash, the operator of IGA. Despite this, Coles and Woolworths, which were ranked third and fourth respectively, demonstrated slight improvements in their scores. However, both companies are still perceived as exercising excessive control over product placement and availability on store shelves. This dynamic underscores the uneven power balance within the industry, with larger retailers maintaining significant leverage over smaller suppliers.

The report marks the first assessment under the revised Food and Grocery Code of Conduct, which came into effect on April 1, 2025. This regulatory framework aims to address long-standing issues of inequality between supermarkets and their suppliers, including the fear of retaliation against suppliers who speak out. Sarofim pointed out that the concept of retribution remains deeply intertwined with the inherent power imbalance, making it challenging for suppliers to feel secure in voicing concerns.

This report follows a series of legal actions initiated by the Australian Competition and Consumer Commission (ACCC), which uncovered extensive negotiations between supermarkets and suppliers. These included discussions around "discounts" paired with price hikes, revealing how supermarkets sometimes manipulate pricing strategies to maintain competitive advantage while squeezing suppliers. As inflation and interest rates have risen, consumers have diversified their shopping habits, leading to heightened competition among supermarkets. Yet, this competition has reportedly resulted in suppliers bearing the brunt of cost-cutting measures, with some reporting that they are forced to offer greater discounts or higher margin contributions despite being unable to raise their own prices.

One supplier, who remained anonymous, described the situation as highly precarious. They stated that suppliers are expected to provide additional margins even when they cannot increase their prices, while simultaneously being asked to lower prices to boost the supermarkets' profit margins. Non-compliance can lead to the removal of products from shelves, resulting in potential loss of substantial revenue and employment opportunities. The supplier expressed fear of the consequences, noting that over time, supermarkets have managed to increase their profits without corresponding gains from suppliers.

Coles responded to the report by expressing disappointment with its conclusions, arguing that the findings relied on selective anecdotes and lacked sufficient evidentiary support. The company reiterated its commitment to working collaboratively with suppliers, the Code Supervisor, and the government to ensure the Code benefits all stakeholders. Woolworths has not yet issued a public statement, leaving room for further scrutiny and dialogue. As the debate continues, the implications for the future of the grocery sector remain uncertain, with calls for greater transparency and equitable practices shaping the landscape ahead.