The new initiative by Woolworths to fix prices across a range of its fruit and vegetable product lines has been met with caution by AUSVEG, the national peak industry body for Australia’s 9,000 vegetable and potato growers and their businesses.
AUSVEG Public Affairs Manager William Churchill today said that they are hesitant about any fixed price structures that operate outside the supply and demand market forces.
“What Woolworths has implemented is an artificial market mechanism to handle this new initiative and it causes AUSVEG some concern for vegetable and potato growers across the country,” Mr Churchill said.
“While this system could be good for growers supplying for Woolworths when prices are competitive, we’re yet to see the details on what happens when competing retailers drop the price of their products below what Woolworths is charging,” said Mr Churchill.
If Woolworths is selling tomatoes at $4.99/kg while other retailers are selling the same product based on a market price of $2.99/kg, how can Woolworths expect to maintain its sales of tomatoes? The other question that arises is what happens to growers who are supplying Woolworths if Woolworths’ competitors are unwilling to pay the fixed price and are undercutting Woolworths? Will those growers still have a guaranteed market?
“Setting an artificial price mechanism bypasses market forces such as consumer behaviour, weather variability and other factors. These will ultimately distort future forecasts within the market,” Mr Churchill said.
“AUSVEG is still waiting to have discussions with Woolworths to seek greater clarity on details of the plan, but overall we are remaining cautious about the new initiative and how it will affect growers.”