Coles price war sparks fears for growers

31 Jan 2012, 6:45 pm   -   Source: AAP

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Coles has slashed the price of fruit and vegetables in its supermarkets, sparking fears about the long-term impact the move could have on growers.

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Fruit and vegetable growers fear they will become the latest victims in the supermarket discounting war after Coles slashed its fresh produce prices, prompting expectations that rival Woolworths may follow.

A bumper growing season combined with the high Australian dollar has meant farmers have an abundance of fruit and vegetables available.

Coles has now slashed fresh produce prices by up to 50 per cent in a move they say will help farmers shift excess stock.

The supermarket giant claims that by making fruit and vegetables more affordable they can provide a more certain market for Australian growers.

But vegetable growers body Ausveg said that if the supermarkets became locked into a price war the opposite would happen, leaving farmers facing potential financial ruin.

Coles' move has been attacked by rival Woolworths and acting Australian Greens leader Senator Christine Milne, saying the discounting could put some growers out of business.

Aus Veg national marketing manager Simon Coburn said aggressive discounting would hurt Australian growers.

"It's not going to be long before Woolworths jump in," he said.

"There's no way they're going to be giving this much ground on Coles.

"The issue is whether these retailers are going to be absorbing the costs themselves, which is pretty unlikely, in which case these discounts will be passed on to the growers to absorb and that's not sustainable at all."

Mr Coburn said in the short term the growers supplying Coles would benefit from higher sales.

But if the aggressive pricing tactics prompted Woolworths to follow suit, the effect on the industry as a whole would be negative.

National Farmers Federation chief executive Matt Linnegar said the price cuts were about attracting customers and the benefits to growers relied on Coles increasing its sales.

"How much of what we're seeing is only short term? Can prices continue to be slashed?" he said.

Coles and Woolworths have previously tried to undercut each other on a range of other staples including bread and milk.

Woolworths chief executive Grant O'Brien accused Coles of misleading shoppers with its latest round of price cuts.

"It's a promotion that happens every day of the week in retail land," Mr O'Brien told analysts on a conference call.

"To say it's a huge reduction and market-changing or game-changing is in a way to mislead."

Senator Milne said that while the price cuts would be welcomed by shoppers, some farmers could be put out of business.

"I am sure that there will be some growers that go out of business," Senator Milne told reporters in Hobart.

"Already in Tasmania there are farmers producing for the fresh vegetable market who are selling below the cost of production."

Coles defended its price cuts, saying they were good for growers who had produced a bumper crop.

"By offering customers low prices on fruit and vegetables, Coles expects to increase sales, providing a more certain market for Australian growers who with such an abundance of product may otherwise end up having to leave some crops in the fields," Coles said.

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