A Complex Information-based System
The following series of articles are taken from The Age and The Sydney Morning Herald. They describe and analyse aspects of the system(s) which supply fruit and vegetables to Australia's main cities. The overview articles are purely descriptive, but the other articles contain various points of view about the system, how it works, to whose advantage, etc. I have grouped the articles roughly according to the main point of view which they represent, but note that each article contains some
Contents
1.Overview
Supermarkets, growers take fresh approach2
Green giants are gobbling up the little growers4
2.The Producers
Woolies the worm in that plastic fruit6
Farmers say big two are leaving them in a jam9
Down on the farm, a mystery: who pockets the profit?11
Scale drives family farms that are growing to survive13
3.The Wholesaler
Growers going direct to sidestep markets' secrecy14
Brothers know the perils of both sides16
4.The Big Retailer
Market smiles and the forklifts scurry when 'guru' drops in17
Cashing in on shoppers' confidence 18
Woolies plays fair and there's room for all, says chief19
5. The Small Retailer
Grocers keep a close eye on their two big brothers21
Small operators seize the day as customers seek more 23
choice and variety
6.The Regulators and Customers
MPs demand inquiry into the power of two24
Supermarkets, growers take fresh approach
January 25 2003
Where does your supermarket produce come from? Lyall Johnson
follows the food chain.
[See also the graphic which came with this article, included as a .jpg file on the unit web site]
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As the bushfire haze of last Monday morning reached Peter Cochrane's small farm near Cranbourne, his workers were already pulling out bunches of spring onions.
Supermarket chain Safeway had ordered the onions the week before and they were due on the shelves on Wednesday. As it turned out, the Camberwell supermarket where some of the spring onions were delivered, had them on the shelf at 7.30pm Tuesday - about 35 hours after they had left the ground.
The image some consumers have of produce, especially in the supermarket chains, is of fruit and vegetables languishing in cool rooms or freezers for weeks, even months, before they are brought out.
Certainly, some do. Bananas are ripened either in a box with an ethylene gas or in special ripening rooms to stop them being damaged or going off during the days of transport from the north.
The latter practice is also to comply with government fruit fly prevention regulations that prohibit the transport of ripe fruit into Victoria.
And because they are seasonal, apples, pears and sometimes even grapes are kept in "controlled atmosphere" storage and ordered throughout the year to ensure year-round availability.
But for Mr Cochrane and the state's thousands of vegetable growers, Monday's consignment was just another order on a normal day.
About 80 per cent of Victoria's fruit and vegetables are grown locally and delivered to retailers within 48 hours of leaving the farms.
At Mr Cochrane's Devon Meadows farm, the time from ground to cool room is about 30 minutes. The onions are bunched and tagged in the field and placed in lots of 200 in a large bin.
Within minutes of leaving the ground they are brought to the shed, washed twice - once in a tub and then under high-pressure water - before being placed 20 to a crate in the cool room.
Mr Cochrane has an 8.15am time slot at which he delivers to Safeway every morning. Therefore, the onions are kept overnight at four degrees.
In theory, produce could be on shelves within a day.
According to Safeway's senior produce buyer Robert Bolge, the company is acutely aware of maintaining an efficient supply chain between the field and the consumer. Usually, the supermarket chain carries only half-a-day's supply at its Melbourne distribution centre, a 21,447-square-metre fruit and vegetable "refrigerator" at Mulgrave.
All stores get at least one order of fresh produce a day.
Mr Bolge says Safeway sources about 60 to 70 per cent of its produce from local growers. The rest is bought through brokers at the Melbourne Market Authority in West Melbourne.
The authority's chief executive, Bob Penter, says locally grown produce brought to market is sold to local greengrocers as well as supermarket chains. It is here that the "market price" of fresh produce is set.
Mr Penter said there was a whole other debate to be had on whether independent grocers buying through the market provided a greater diversity of produce than supermarkets in terms of shapes and sizes. But he agreed the food industry was the most efficient it had ever been in getting fresh produce to consumers.
This story was found at:
Green giants are gobbling up the little growers
July 8 2002
The supermarket supremos Woolworths and Coles are exerting enormous
influence even beyond the farm gate, Consumer Writer Matt Wade reports.
Australians' love affair with Coles and Woolworths has helped drive thousands of fruit and vegetable sellers to the wall and is forcing many farmers to get bigger or get out. Amid continuing allegations that the two supermarket superpowers are squeezing both smaller rivals and producers on the price of fruit and vegetables, there is growing concern about the power they have over the cultivation, distribution and sale of food.
"The two big retailers are exerting incredible influence down the food supply chain," said a SydneyUniversity economic geographer, Dr Bill Pritchard. "Corporate strategy these days is all about controlling systems without owning them and that's certainly what Woolworths and Coles are doing with the supply of food."
The buying power of this mighty duo means that they influence the size of farms, which crops are planted, how they are grown, how they are transported, and what price they fetch.
A new report for the Productivity Commission by the consultants Retailworks said the number of independent fruit and vegetable retailers plunged by 56 per cent between 1992 and 1999 - from 3670 to 1611.
It attributed the decline to "aggressive activity" by the big two, saying Coles and
Woolworths control 65 to 70 per cent of the take-home fresh food market.
"Australia has the most concentrated take-home food market in the world," said the
managing director of Retailworks, Martin Kneebone. "No-one else in the world would have two players with even a 25 per cent share - we are very distorted in that respect."
A 1999 parliamentary inquiry into food retailing concluded that it was "heavily
concentrated and oligopolistic in nature" but the market share of the two supermarket giants has continued to expand.
The National Association of Retail Grocers of Australia, which represents small food retailers, says many of its members are victims of the market power of the giants.
"Successful independents are being strategically targeted by Coles and Woolies," said its national spokesman, Alan McKenzie.
At the other end of the food supply chain, farmers are angry about the creeping influence Coles and Woolworths have on them.
Woolworths buys 25 per cent of all the fruit and vegetables grown in Australia and about 15 per cent of the meat for its 680 supermarkets.
Coles and its counterpart Bi-Lo, owned by Australia's biggest retailer, Coles Myer, have more than 520 supermarkets and sales of about $16 billion a year.
Such is their ascendancy, that most of the Woolworths and Coles suppliers contacted by the Herald were unwilling to comment on their experiences in dealing with them. Some analysts say that even multinationals such as Kelloggs, Nestle and Colgate are careful not to upset them.
"No major supplier, no matter how big or powerful they are, can afford to be offside, or out of favour, with Coles or Woolworths," said Mr McKenzie.
Adjunct Professor Barry McGlasson, a University of Western Sydney food specialist and Woolworths consultant, said the trend for farmers to increase size and production was being accelerated by the supermarket majors.
"We are seeing the growth of larger private growers and corporate growers," he said. "Smaller growers are also forming themselves into marketing groups so they can do business with the likes of Coles and Woolworths."
The number of fruit and vegetable farms turning over more than $200,000 a year is rising, says the Bureau of Statistics, while the number of smaller growers is declining.
Up to half of the fresh fruit and vegetables that end up in Woolworths stores are sourced directly from farms. Many analysts believe this is bound to grow, adding pressure for producers to expand because the big retailers favour those who can deliver big volumes over long periods.
As well, say growers, Woolies and Coles only buy produce from growers accredited withthe companies' quality control systems, which regulate everything from fertilisers and chemicals to the size and appearance of produce and how it is transported.
Food retail analysts say the supermarket giants are now defining the nature of cultivation. The food retail consultants Cap Gemini Ernst and Young said agriculture was moving from a "product oriented" approach to a "demand oriented" approach where the big retailers drive decisions about crops.
The chief executive of Woolworths, Roger Corbett, denied that the company was abusing its position and described its relationship with suppliers as "outstanding". He said Woolworths did not target small players. "We make no apology for doing all we can to offer customers unbeatable value."
Mr Corbett conceded that the grocery market was an oligopoly, but said Woolworths would continue to seek a bigger stake. Coles, which declined to be interviewed for this series, also has plans to expand, meaning the pressure on small retailers and growers is unlikely to ease.
This article can be found at
Woolies the worm in that plastic fruit
By Matt Wade and Michael Bradley
July 9 2002
Australians are eating poorer tasting fruit, treated with increasing amounts of chemicals, because of stringent quality specifications by Woolworths, says the nation's largest citrus grower-packer.
"Woolworths just wants more and more plastic fruit," said Steve Twomey, domestic sales manager for Vitor Marketing in Renmark. "They only care that it looks shiny and beautiful."
He said the response from growers wanting to sell to Woolworths, which buys a quarter of all Australia's fruit and vegetables, had been to increase their use of pesticides and fungicides to reduce blemishes.
Many growers and food experts are concerned about the increasing standardisation of the food supply chain which the big two supermarket companies demand.
As their market share increases, Coles and Woolworths influence what happens to the fruit or vegetables they buy - from the time they are planted.
They insist that suppliers have standard systems which allow them to track when the
produce was harvested, who picked it, which batch it was part of, and the temperature during storage and transport.
Small growers must pay thousands of dollars a year to maintain their standards
accreditation and this eats into their profitability.
Big retailers believe that their standardised systems protect consumers and help growers to be more efficient. The tracking systems assure quality and allow the source of any contaminated food to be pinpointed.
But some experts are concerned that this increasingly regimented supply chain makes it more vulnerable to disruption and contamination.
Dr Bill Pritchard, an economic geographer at SydneyUniversity, warned: "We are
provisioning our population in very new ways. It seems terrific when the systems are working well, but if things go awry we will have a few issues to confront.
"A more concentrated chain with more distances for food to travel means more
opportunities for major food scares - this is an issue lurking in the background."
Mr Twomey said the quality demands meant that new varieties of citrus, capable of
producing larger, shinier fruit, were being planted.
"We now replace 3 per cent of our trees every year," he said. "They might look better, peel easier, they might be seedless, but they don't taste any better and I don't think they are going to be the saviour of our citrus industry."
Mr Twomey said more than half of Vitor's 50,000 tonnes of produce was now exported because "Woolies are too hard to deal with".
"They will reject fruit if it has three square centimetres of its surface blemished, because they think consumers won't buy marked citrus - even though the fruit is identical under the skin."
Coles was not as stringent, but was "definitely moving in that direction".
Only about 30 per cent of Sydney's food is still grown in NSW. The rest is trucked vast distances to the nation's biggest food market using "cool chain" technology to maximise its life.
Professor Barry McGlasson, a fresh food distribution specialist from the University of Western Sydney, said temperature management was "the most effective tool we've got to slow down loss of quality in fresh food".
The supermarkets are investing millions in their own cost-effective distribution systems.
The latest high-technology addition to the Woolworths fresh-food distribution system is Building X, a huge sealed structure above the rabble at the western apex of Flemington Markets.
As mysterious as its name suggests, Building X is shielded by boom gates, monitored by security guards and under constant video surveillance.
Woolworths bought it last year from the failed Franklins chain, gutting the building and transforming it into a state-of-the-art food distribution centre.
A loading area the size of three football fields processes more than 25,000 boxes of fresh fruit and vegetables each day.
The 80 staff are always dressed for winter. The temperature never rises above 14C, and very sensitive produce, such as mushrooms and lettuce, is cooled to about 2C. Another vast coolroom, kept at 8C, is used for apples.
Electric forklifts ferry pallets of produce through automatic plastic doors that separate the coolrooms from the loading area, where arriving produce undergoes immediate quality assessment. It is sent back if it does not fit Woolworths specifications.
Staff take digital photos of rejected produce and email the images to the grower within hours.
There is evidence the scale of the big food retailers is benefiting consumers and some economists argue that big players are appropriate for the sparsely populated Australian market because they have the economies of scale to keep costs down.
Roger Corbett, chief executive of Woolworths, is adamant that consumers are the big winners.
"We have nationalised our buying and distribution and when you do that there are
enormous economies of scale. We pass these lower costs on to customers as lower prices."
Woolworths will spend $1 billion improving its supply and distribution systems over the next five years.
The Australian Consumers' Association says the food and grocery market is still
competitive and that consumers are happy.
"Coles and especially Woolworths are obviously appealing to consumers," said ACA's chief executive, Louise Sylvan. "They are offering the sort of thing that consumers want to see."
Although the ACA would become concerned if the market share of the major chains
jumped higher, "it's something that we do need to watch".
This story was found at:
Farmers say big two are leaving them in a jam
ByMichael Bradley
July 9 2002
Phillip Andreatta is crushed. The grape grower says he has wasted too much time and money on building a relationship with Woolworths and is about to sever his ties with the supermarket.
For the past 12 years, Mr Andreatta has supplied his local Woolworths in Griffith with 30 per cent of his produce on the understanding it matches the price he receives at market (minus transport costs) for the remaining 70 per cent.
In return, he has had to comply with Woolworths' compulsory quality assurance scheme. He has undertaken a three-day training course at his own expense. He pays $1200 a year in auditing costs, a further $600 annually in associated insurance costs and spends up to an hour a night filling in the supermarket's documentation.
But the arrangement, at least for Mr Andreatta, is no longer running smoothly.
His grapes regularly top the market at Flemington, fetching up to $30 per 10-kilogram box. Yet the supermarket, he claims, is offering only $22 a box for the same quality grapes.
"They know what I'm getting through the markets, but they say they can't afford to pay me that sort of money.