This is an edited transcript of what coles CEO, Ian McLeod had to say on a television program about milk and farm produce pricing and farmers
Coles chief executive officer Ian McLeod was interviewed by Ellen Fanning on SBS TV’s The Observer Effect last week.
This is an edited transcript of what he had to say in the segment about milk and farm produce pricing and farmers:
I know that it’s sensitive issue and has been for some time. We worked hard to improve the efficiency of our business which then created an investment pod which we took to invest in a number of products and that’s when we introduced the down-down campaign because we wanted customers to recognise prices were coming down not just on specials but that were staying down.
If you really want to make a difference for the customer then what you have to do is make sure that the products you are bringing down in price are ones they are buying every day.
I guess the perception is that if Coles are squeezing prices down on the other side, dairy farmers are being squeezed?
That’s a good point, because I think there is a complete disconnect between the retail price of milk and what’s going on in the market place. And what influences the farm gate price is the export market. About half of milk is produced goes overseas. What we’ve had is a very strong Australian dollar, so there are dynamics that are at play that are quite different and disconnected from the retail price. So over the last couple of years what we’ve recognised is lack of transparency between farm gate price and the price that processors get and the cost of production.
We’ve gone direct to the co-operatives and said we want to deal with you direct through your own processing plants which we will build and commit to long term to commit to a long term investment with you.
So now there are 2500 dairy farmers have got a share of the return in terms of cost rise we are paying.
The farm gate price will be based on international demand and strength of the dollar etc.
But they will share in the profitability, so as our volume moves up they will get a greater benefit back.
You have always said you are doing the right thing by dairy farmers and you are looking out for their welfare, but we did get something of an insight into Coles attitude from the head of corporate affairs Robert Hadler (general manager, Corporate Affairs at Coles) who gave a power point presentation and he talked about how Coles has managed bad publicity around this issue. One of his key messages was that ‘‘we use every PR tactic possible’’ to neutralise the noise. He means those unhappy with what Coles is doing?
The challenge we face and to be honest some of the frustrations we face is that the media like the conflict story and anything we do to improve performance in supply or how we develop suppliers and build them, there’s nothing I like better when you’ve got a small supplier with an idea ...
When I talk to dairy farmer organisations that’s not the story they tell.
They would say that because it doesn’t necessarily suit them ... I can’t talk for the dairy industry overall ... the dairy industry in Australia, and across the world. You will find the same dynamics that are happening, there is a requirement in production whether in dairy or other parts of food manufacturing, to look to improve efficiency.
What we’ve found in our attempts to give the consumer a better deal there has been either a confusion or a strong attempt to link the two, to use our approach on milk as a bit of bete noir (bug bear) to further the case of the dairy industry overall. I have a lot of sympathy for dairy farmers, my grandfather is a dairy farmer ... but things have to change. The country has to change. Productivity in Australia, more generally has to improve. Some of the highest manufacturing costs in the world are coming out of Australia.
When you are working in the business and genuinely trying to do what is right for consumers or suppliers, but the world doesn’t get out and doesn’t get heard, because the media is not that interested because it doesn’t have a conflict attached to it.
Another element of the slide is inevitable farmer protests. Doesn’t that suggest the attitude inside Coles about noise that needs to be neutralised and inevitable farmer protests and they just need to get out of the way?
That’s not the case. I can understand farmers feel entitled to air a voice of concern.
Does that concern you that that sort of thing has a Coles logo on it?
Yes, you don’t like to have people believing you are doing the wrong thing, which is why we are trying to make sure that people recognise we are trying to do the right thing.
The message that comes through is that our job is to sweep away the criticism?
But if that was the case, we wouldn’t do the things that we do. Our Coles brand products are 90 per cent Australian made or Australian grown. I am responsible for 100,000 people across Australia and I want to keep them gainfully employed ... opportunities to grow. The way I can do that is to make sure the customer is the heart of everything we do. One of the biggest concerns that was raised, and it even one of the election tickets that Kevin Rudd got in on in 2007, was that he was going to hold the supermarkets to account to make sure that Australian families didn’t get ripped off by high grocery prices.
Are you prepared to say that, yes, if you are ruthless at corporate HQ in pursuit of those goals, that’s okay?
I think that ruthless is the wrong word. Determined, even relentless, but not ruthless. What we are determined to do is get the best deal for our customers. What I want is to make sure that the suppliers who work with us get the opportunity to share in that growth.
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