Supermarkets, do more rules equal better data?

Australia has the most concentrated food market of any nation on earth with the two main supermarket chains controlling 70% of packaged grocery sales and 50% of fresh produce sales. Despite a population of just 23 million, these two key players are amongst the biggest 20 supermarket chains in the world, and on a per capita or per dollar of Gross Domestic Product (GDP) basis for their specific consumer market, are much larger than businesses like Wal-Mart or Tesco.

The key issue for food retail in Australia – as a matter of urgency – is the increasing need for transparency along the domestic food supply chain. The Autumn 2013 Farm Policy Journal entitled, ‘Will supermarkets save or enslave agriculture?’, looks into the interaction between supermarkets and agriculture, in Australia and the rest of the world.

The need for greater market transparency is a highly important issue, providing all supply chain participants with a clear understanding of market developments and the opportunity to respond accordingly. The article by Steve Spencer, from Freshagenda, highlights the lack of consistent data along the milk supply chain, which confuses participants and contributes to emotive reactions. With only 25% of the total milk being used for fresh packaged milk, it is important to pay attention to factors other than supermarket discount campaigns when discussing farmgate prices.

At times when international factors, such as the New Zealand drought, have resulted in soaring milk prices, the domestic milk supply chain may see prices change in ways that cannot be explained by the domestic retail duopoly. In their paper, Philippe Boyer and Julie Blanchot from FranceAgriMer explain the role of data surveillance programs, such as the one they monitor in France. In France, as in Australia, the national competition authority is required to monitor competition and has the power to collect relevant data. In both countries, the power of authority is limited to the availability of existing statistical data and to the rules of information confidentiality. The critical difference in France is that the agricultural agency has statistical authority, and is therefore able to initiate a price and margin surveillance program for specific markets. The surveillance program described in this paper provides, for various food products, a detailed analysis of the value chain (added value, return and costs) from the farmgate to the end use (retail or export) of the products. The real advantage of a program such as this is that margins analysis can be repeated on a regular basis using consistent data, so that all market participants have a transparent perspective of market developments. Interestingly, French supermarkets have now agreed to share some of their internal information in order to improve the availability of market data.

In its paper, the Australian Competition and Consumer Commission (ACCC) outlines how the Competition and Consumer Act 2010 deals with competition issues arising in the agricultural sector. The paper provides an outline of the extent of the powers of the ACCC, information which is valuable in the light of myths and misunderstandings about its role. What is clear, and also discussed in the recent Institute research, Is counting farmer harder than counting sheep? A comparison of the agricultural statistical systems of Australia, the United States and France, is that the ACCC is not a statistical agency and as such does not have easy access to consistent and relevant data to accurately and comprehensively monitor the supply chain.

The Australian Government is now seeking a resolution and developing a retailer code similar to that of the United Kingdom (UK). The UK Government implemented a mandatory Grocery Supply Code of Practice in 2010 which imposes rules and reporting guidelines on retailers – but one shouldn’t compare apples with pears. The UK’s grocery supply chain is considerably different to Australia’s, with 79% of the retail grocery market held by the four largest retailers, private label goods leading sales growth, and farmers’ incomes linked directly to European subsidies.

The papers in the Autumn 2013 Journal don’t directly discuss the impact of a mandatory code versus a voluntary code. However, to be effective, any ‘mandatory’ code requires the organisation, and corresponding funding and expertise, to enforce it. It wouldn’t be efficient to create more rules with no-one to enforce them. With public funding tightening for agriculture, it is important to remain realistic. Before creating new rules, a first step should be comparing the costs of a more transparent system with improved data versus an effective more regulated system.

The lessons to be learned from the Autumn 2013 Farm Policy Journal and the recent Research Report, Is counting farmer harder than counting sheep?, include an urgent need to increase data quality and transparency in the Australian agriculture sector. Therefore, if only one thing were to be mandatory, it would be that all participants in the supermarket supply chain provide the necessary data to assess existing policies and procedures.

Images:  James Cridland, GabrielaP93, ipostcodes

Back to May 2013 Insights contents page.