Why that chicken and lettuce sandwich might be off the menu for a while yet

“If you have a supply shortage, and you can’t get enough product that will likely lead to higher prices in any event whether you’ve got a lot of competition or duopoly, but it is more likely to happen and to a larger extent if you’ve got duopoly because they’ve only got one other player to look at to see what they are doing and to care about what their prices are.”

Annabel Johnson, head of policy and advocacy at the NSW Farmers Association, said Australia’s food supply chain was too consolidated and not resilient because it had only “one or two processors and retailers”.

“In the processing space there are just two companies responsible for processing 70 per cent of the nation’s chicken,” she said. “This lack of competition means the growers have little bargaining power and many family farms are being forced from the industry.”

Johnson said most consumers would not be aware that poultry farmers don’t own the chickens which are owned by processors including Inghams and Baiada.

She said farmers were often offered contracts with processors “on a take it or leave it basis”.

“They either have the option to sign the contract or to leave the industry. These businesses have large assets on their properties, so they don’t really have the option to stop producing the chicken,” she said.

“We are seeing more family farms leave the industry because the pressures on being able to produce are not sustainable for their businesses to be productive and profitable.”

The Australian Food and Grocery Council has also warned the food and grocery manufacturing sector is facing a “defining moment”. “Without innovation and new investment, this vital sector could stagnate or even decline,” it says in a report called Sustaining Australia: Food and Grocery Manufacturing 2030.

“The strengths that made the sector a resilient and reliable force during the COVID-19 lockdowns of 2020 and in the decades before then, are not enough to ensure a robust and growing sector well into the 21st century.

“Food and grocery manufacturers have little opportunity to pass on higher input costs due to the highly concentrated nature of Australia’s retail marketplace. In a market already dominated by two major supermarket retailers, the arrival of overseas-based competitors has driven a focus among the majors on cutting purchasing costs. The result has been a limited ability for manufacturers to pass through cost increases, a progressive decline in operating margins, and stagnation in the new investment required to stimulate innovation and productivity.”

The AFGC recommends that the Australian government monitors the effect of supermarket
buyer power on manufacturers’ profitability and investment levels; and the effectiveness of the
Food and Grocery Code of Conduct.

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A spokeswoman for Woolworths said it operates in a highly competitive environment, with a range of new entrants to the market in recent years including global retailers, food kit services and delivery startups.

“We’re always working to balance value for customers to help manage cost of living, fairness to our suppliers and supporting the more than 180,000 Australians we employ,” she said.

A Coles spokeswoman said it was focused on delivering value to customers who were facing cost of living pressures.

“Last month we commenced our latest round of price reductions to cut the price of more than 500 products,” she said. “To help household budgets go further, Coles has locked the price of 1,168 products across supermarkets and online until at least 31 January 2023.”

For example, the price of Coles RSPCA Approved Chicken Portions with BBQ Rub has been reduced from $9/kg to $8.50/kg. The price of Coles Eggs Free Range 12 Pack 700g has been “locked” at $4.90

The Herald sought comment from Inghams and Baiada but received no response.

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