Supermarket major Coles is considering a massive shakeup of its supplier model that would squeeze out independent middlemen responsible for negotiating grocery deals.
Coles is considering changing the way supplier agents interact with the supermarket chain; potentially carving into their profits in order to to reduce its own outgoings.
There are currently 20,000 independent agents in Australia that negotiate on behalf of grocery suppliers on the way their product is placed and promoted in stores nationally.
Agents typically take a 5 per cent cut of their clients sales, in order to negotiate with store managers about the way product is being displayed, priced, discounted, and restocked.
The Sydney Morning Herald is reporting that Coles is now considering changing this long-standing system by only working with agents that are “approved” by the retailer.
These accredited agents would charge a fee set by Coles, understood to be less than the 5 per cent standard implemented currently, as well as charge a rebate on top of that.
The proposed reforms, detailed in a confidential tender issued last month, could allow the supermarket to nab millions of dollars off existing middlemen and radically change the supplier model.
The SMH is alleging that Coles considered a similar model in 2006 but that it was blocked by the competition regular on grounds the move would be anti-competitive.
Suppliers would essentially be forced to deal with Coles’ own agents lest they be squeezed from the shelves of one of Australia’s two largest supermarket chains.
Coles and rival Woolworths have both taken a hardline approach to suppliers in the last two years, with both making headlines due to allegations they have been using bullying tactics.
Coles has been rationalising the approach as it being a way to take back control of its supply chain; boosting profits and allegedly passing on cuts to consumers.
The Australian Food and Grocery Council (AFGC) is currently negotiating a voluntary code with Coles, Woolworths, and independents like Metcash, that would see national supermarkets self-regulate supplier relations.
Inside Retail understands that key supply chain issues, including those surrounding the supermarkets’ contentious home brand labels, continue to be a sticking point on the finalisation of the code.
