Wollies Demands 5-10% Cost Savings from Suppliers Under Threat of Shelf Removal

Manufacturers have accused supermarket giant Woolworths of bullying them into cutting their costs and prices or else be banished from the shelves.

Reports said that food manufacturers were given two weeks to find cost savings from 5 to 10 per cent for it to remain on the grocery aisles. The forced price cuts are seen as Woolworths's way of funding its ongoing price war with main competitor Coles.

According to a note from the Australian Food and Grocery Council, Woolies defended the forced price cuts on the claim that it is the food makers which are engaged in price gouging. However, Woolies denied there is a two-week deadline for the terms of trade negotiations.

"When we put our position to vendors we often ask them to come back to us in two weeks with their response. However, it is a negotiation and this often necessitates ongoing discussions," Woolworths spokeswoman Claire Kimball was quoted by The Sydney Morning Herald.

"Negotiating terms of trade is something we do day in and day out. Any conclusions reached in negotiations have to be mutually agreed," she added.

Woolworths holds a 40 per cent share of the grocery market, but is losing its share due to the aggressive stand taken by Coles. The food manufacturers believe Woolies would use the price cut to only increase its profits since the supermarket giant never mentioned in the discussions of passing the lower cost of food products to consumers.

Due to the food makers' complaint, independent Senator Nick Xenophon said he would initiate a Senate inquiry on the Woolworths's action.

About 50 food supplies have complained of Woolworths's bullying tactics to the Australian Consumer and Consumer Commission which said it expects to release its finding on the complaint by the end of 2012.

Besides the battle with food manufacturers and price war with Coles, Woolies is also engaged in a legal tussle with 250 shareholders led by GetUp!, which is seeking an extraordinary general meeting. The aim of the meeting is to vote on changing the firm's constitution to prevent Woolies from owning or operating poker machines that would accept bets over the $1 minimum.

Getup! wants a forced revenue limit of $120 per hour and time limit of 18 hours daily beginning 2016 for the gaming machines. Woolies filed an application with a Sydney Federal Court to delay the meeting until the company's yearly general meeting on Nov 22.

Woolworths said the meeting would cost money, but Getup! countered that the cost of an emergency general meeting would be less than 1 per cent of profits the supermarket giant makes yearly on 12,000 poker machines spread in the grocery's chains.