How business works
A couple of weeks ago ABC News reported an apple shortage was pushing prices higher.
APAL, the apple and pear growers’ body, says that instead of passing on the price rise to orchardists the big supermarkets were pocketing most of the profits.
This week I imagine myself sitting behind the desk of one of the big supermarket’s apple buyers…
…Each week we run the weekly tender when all my apple growers message me with how many kilos of apples they have to sell and the price that they want.”
I can see all their prices together but they can only see the one price they’ve put in.
At the beginning of the season I give each grower an indication of how many apples I’m going to buy from them, but each week I can buy my fruit from the cheapest grower or ask a grower to drop their price to the lowest bid.
Because us and the other big supermarket buy most of the apples the growers can’t push back.
Anyway there’s nowhere else to sell to unless they dump onto the wholesale market and crash the price for everyone else.
Keeping prices low is very important – lowest prices from growers means, specials for customers, biggest margin for the company and maximum result for our shareholders. Everyone wins.
Farmers tell me they don’t make any money, but they just have to become more efficient. It’s not personal, it’s just how business works.
According to Jeremy Griffith from APAL most apple growers have not made a profit for the past four years.
Griffith says orchardist’s kids don’t want to take over the family farm and be squeezed for more and more profit by an insatiable supermarket.
Bob Sanders, owner of Sanders Apples in the Yarra Valley, points out that if growers aren’t profitable they simply stop growing apples and then Australia becomes dependent on imports.
In another “it’s just how business works” move Coles decided that from October its supermarkets on the NSW Coffs Coast will stop buying locally grown bananas.
Now instead of buying bananas grown just 6 kilometres away a Coffs Coast Coles customer will be offered bananas that have travelled 1,600 km from North Queensland.
Up to forty farming families, some, who have been growing bananas for Coles for over thirty years, will lose their contracts?
Locals say this will take out $18 million to $30 million a year from the Coffs Coast economy. Over 32,000 people have signed an online petition demanding Coles reverse the decision.
Coles’ logic is that by dumping its NSW growers and buying all of its bananas from Queensland it’s simplifying its supply chain.
Australia grows 94% of our bananas in a cyclone-prone corner of North Queensland the size of Melbourne’s inner suburbs – concentrating production even further in one place seems like putting all your eggs in one basket and then leaving it out where hurricanes pass through.
When the only focus a business has is driving costs down, down it leads to farmers getting out, out and prices going up, up.
Which inevitably leads to supermarkets looking overseas for the lowest cost product to import.
And when we import cheap we begin to discover things like our tomatoes are being harvested by forced labour, our chocolate has been grown by child slaves and our honey is faked-up with sugar syrup.
It’s just how business works.
Have a great week
Chris
