Coles willingly takes a meat profit hit as livestock prices leap _ farm online

Coles boss, John Durkan, says the supermarket chain will weather the lamb price squeeze, holding its nerve on retail values where possible to preserve its customer loyalty.

Despite record saleyard values for lamb and beef, the big retailer is taking a long-term approach to the current market’s supply and price pressures in order to keep its shoppers buying red meat.

In fact, Coles actually reduced its meat section prices for certain steak and mince lines in January and February.

The extended discounts cut T-bone and porterhouse steak by $2 a kilogram, or nine per cent, to $21 and $30 respectively, and three star mince by about 11pc.

“Meat is such a core part of our offering for us and we don’t want to lose our customers,” said Mr Durkan, Coles’ managing director.

“Lamb is very expensive at the moment. How to make philly steak meat We just have to accept our buying costs will be higher at times like this.”

His comments came as Coles also announced it will speed up payment arrangements to almost 1300 smaller farmers and processors who supply meat, fresh produce and other grocery lines to its stores.

Suppliers who annually provide Coles with up to $1 million worth of product each will be paid for all electronically-submitted invoices within 14 days.

On average most smaller scale producers are currently paid within 30 days, although larger suppliers have more varied and “bespoke” terms.

Although saleyard lamb prices this week continued climbing to a national average high of 665 cents a kilogram – up from about 520c/kg a year ago – Mr Durkan said Coles had to take a long-term view of cyclical commodity price trends.

Customers wanted consistency as much as possible in their meat, fruit and vegetable choices, not prices which abruptly followed broader market fluctuations.

With last year’s shopping trends in the Australian grocery and consumer goods sector proving the softest in 30 years, Mr Durkan said Coles was conscious of doing its utmost not to discourage customer engagement.

However, in the past year red meat prices have reflected increasing supply pressure and he was not surprised to find some customers buying more of other proteins, particularly chicken which was far less cyclical in its supply and price trends.

Meanwhile, the new, shorter payment terms for about a third of Coles suppliers will align with suppliers currently using paper invoices switching to electronic invoicing.

“The majority of our payment arrangements are done electronically already, but all we need to do for the remainder is to have internet access so we can deposit funds into their bank account sooner,” Mr Durkan said.

“Even in areas with variable quality internet they’ll be getting paid a lot faster than 30 days.”

Prior to the change taking effect Coles will work with suppliers still using paper-based invoice systems so that they can take advantage of 14-day payment terms, although it acknowledged some may want to stick with paper systems for the time being.

The big retailer may even be able to find ways to reduce electronic payment terms further once it gets the 14-day process fine tuned.

“We’d never say never to that possibility, but in the meantime this is a material step in helping suppliers run their businesses,” he said.

“We understand how important cash flow is for small businesses … we want these businesses to flourish and invest more in their operations.”

About 95pc of Coles fruit and vegetable produce is now source via direct contracts with suppliers, while 90pc of beef is bought via contracts with lot feeders or on-farm.

A decade ago the company relied on central produce markets to source much of its fruit and vegetables, and 75 different suppliers of boxed beef.

Under Mr Durkan’s leadership the focus has switched to finding longer term “secure sources of supply”, giving Coles executives confidence in the commitment and investment being made by their suppliers.

“It’s in our interests to have suppliers who’ll still be with us next year, so we’re keen to have all our suppliers making money, too,” he said.

“Customers also want to know there’ll be a reliable supply of the quality and quantity of the food they’re shopping for, and increasingly they want to know more about the commitment of those producing it.”

The latest visit to western Queensland by the Burrumbuttock Hay Runners has reignited the debate over whether money should be spent on carting hay or whether it would be serve a better purpose given as cash.

THREE years ago, after moving to her partner’s sheep and cattle station – Wombula, Thargomindah – self-proclaimed city slicker Robyn Pulman was faced with the daunting task of preparing a traditional country roast for some visitors.

Leave a Reply

Your email address will not be published. Required fields are marked *