News

Supermarkets are facing pressure to increase the price of eggs, as farmers face soaring input costs, including transport, fuel, grain and chickens.

As the egg industry faces a structural shift in demand from consumers, shortages are emerging, and Coles has placed a temporary limit on purchases.

Egg farmer Brian Ahmed says consumers need to pay $10 for a dozen free-range eggs at the supermarket or risk seeing producers go out of business as input costs rocket.

Mr Ahmed, who is the Victorian director of Egg Farmers Australia, said grain prices, which account for about 60 per cent of his production costs, had risen 50 per cent in the past six months, and the cost of chickens had risen 36 per cent.

Farmers are not getting a big enough cut from supermarket sales, he says, to make up for the “double whammy” of rising input costs and the growing demand for free-range eggs, which are more expensive to produce because of higher mortality, lower production and increase in feed consumption.

Free-range eggs now represent 59 per cent of the value of supermarket egg sales. Cage eggs make up 28 per cent, barn-laid eggs 10 per cent and organic free-range eggs account for the balance, according to the latest data from Australian Eggs.

But Mr Ahmed, who is also president of the Victorian Farmers Federation egg group, said a colder than normal winter had contributed to the country’s egg shortage as free-range birds had not laid as many eggs.

‘Hit from every angle’

“Production costs have gone through the roof for egg farmers. We’re being hit from every angle – transport, fuel, grain, chickens, and packaging,” he told AFR Weekend.

“We cannot absorb those increased costs. Consumers have to pay for the inefficiencies of that farming system as well as the rising input costs – $10 for a dozen free-range eggs is where it needs to be. But the farmer has to get an increased cut, that’s the important thing. It’s got to be fair.”

Mr Ahmed produces cage eggs himself and has had to raise the farmgate price of his biggest seller, a 700-gram tray of a dozen eggs, by a dollar to $5.

Adam Crew, financial controller of the nearby Casaccio Egg Farms, said the price of basic feed, which made up at least 50 per cent of his business costs, had gone up by $111 per tonne to $614, and the monthly feed bill was coming in at nearly $200,000.

Casaccio, he added, had placed purchase limits on its eggs as “panic buying” had exacerbated the shortage.

Finding the happy medium

“There’s a huge shortage at the moment. We’ve had to cut back our supply to cafés and restaurants,” Mr Crew said.

Casaccio has also had to raise its egg prices by 25 per cent and Mr Crew said egg farmers turning over $10 million would now be lucky to make $300,000 in net profit. He agrees with Mr Ahmed that the price of eggs on supermarket shelves had to rise, but he reckons $10 is too steep for consumers.

“Eggs are the most affordable protein source that low-income families can buy, so I’d like to think there’s a happy medium around $8.50. Supermarkets have to revise their margins though,” he said.

Egg Farmers Australia chief executive Melinda Hashimoto said that at the national level, egg farms were paying 20 per cent more for pullets (young laying hens), 25 per cent more for fuel, and 141 per cent more for canola on top of rising feed grain costs.

Australian Eggs managing director Rowan McMonnies said COVID-19 had contributed to the country’s egg shortage.

“Free range production is more complex than other systems as there are more variables to manage, including seasonal weather conditions,” he said.

“Egg farmers are usually able to meet demand across the year through planning, but COVID disruption has made this difficult.”

The industry body says demand is rising, and the average Australian consumes 249 eggs a year, up from 221 in 2015.

Woolworths and Aldi have not placed a temporary limit on egg purchases.

Endeavour Group has acquired McLaren Vale winery Shingleback Wines, which will now be part of the group’s wine portfolio under its Paragon Wine Estates subsidiary.

The acquisition by the liquor retail giant, which owns Dan Murphy’s, includes Shingleback Wines’ entire brand portfolio, a long-term lease of the McLaren cellar door, and an ongoing grape supply agreement.

“We are thrilled to add Shingleback Wines to our Paragon Wine Estates as part of our strategy to grow our premium wine portfolio,” said Paul Walton, director of Endeavour Group’s products and services arm Pinnacle Drinks.

“Shingleback Wine has been producing beautifully rich and full-flavoured wines for 25 years, and we look forward to continuing to offer it to wine lovers in Australia and around the world as part of Paragon Wine Estates.”

The addition of Shingleback Wine expands Paragon Wine Estate’s regional coverage to brands across six premium key wine regions in Australia and New Zealand, including Chapel Hill (McLaren Vale), Oakridge Wines (Yara Valley), Isabel Estate (Marlborough, NZ), Josef Chromy Wines (Tasmania), Riddoch (Coonawarra), and Krondorf (Barossa Valley).

Founded in 1997 by brothers Kym and John Davey, Shingleback Wine is said to be a product of their love of winemaking, farming, and business. It was awarded the Jimy Watson Memorial Trophy in 2006 and, most recently, secured four trophies at this year’s Sydney Royal Wine Show.

“As a long-term, proud supplier to Endeavour Group, we know that the Shingleback family of wines has a bright future as part of Paragon Wine Estates,” said the brothers.

“We are very proud of our team’s stellar achievements over the last 25 years and are confident that Endeavour Group has the passion, people and capacity to continue to build on that success.”

Woolworths is focusing in on office kitchens across the country as part of the launch of its grocery delivery platform aimed solely at business clients.

The supermarket giant first trialled its “Woolworths at Work” site in 2020 – when most professional services firms were working from home. Despite this, the retailer was able to test and refine the program by delivering to essential services operators.

“A really big part of our focus is essential service businesses – early learning businesses and aged care. They were our core customers that we helped serve,” Woolworths at Work general manager Jarad Nass said.

Now lockdowns are in the rearview mirror, Woolworths hopes to take a slice of Australia’s business supplies market by offering one platform for cleaning products, office supplies and groceries for corporate clients.

Unlike users on Woolworths’ main retail site, business customers have access to real-time spend reports and billing information, free next-day delivery for orders over $99 and more options to get products delivered on Monday mornings.

While Australia’s winter COVID-19 and flu season have led to renewed calls for more staff to work at home, Nass is confident there is still strong interest from workplaces for a one-stop shop for office supplies and groceries.

“What we’ve learned is that it is a very dynamic working environment at the moment, [but] there is still a lot of demand for this service,” Nass said.

Beyond office towers, Woolworths is largely focused on organisations such as schools, hospitals and aged-care facilities, which have been the main sectors using the platform.

The retailer has been working to increase business-to-business sales over the past year. Its B2B food segment, which includes PFD Food Services, its international exports and wholesale business, generated $1.4 billion in sales in the first half of 2022 – an increase of 376 per cent on the same period in 2021.

Woolworths at Work isn’t the first new grocery delivery format Woolworths has tried this year. It also launched one-hour deliveries in a small group of Sydney suburbs via its Metro60 app in June. 

Fellow supermarket giant Coles also has a dedicated business delivery channel, with free delivery on orders worth more than $250.

The Reserve Bank of Australia raised the official cash rate another 50 basis points of Tuesday, putting further pressure on the operating costs of households and businesses.

Despite this, analysts have been viewing the outlook for supermarkets as robust, given businesses and individuals will likely be spending a larger portion of their budgets on everyday essentials rather than luxuries.

Citi analysts have upgraded their 2023 earnings estimates for Woolworths by 3 per cent and Coles by 4 per cent, given expectations that inflation will increase like-for-like sales growth figures over the next year.

Woolworths shares are 7.3 per cent higher for the month, while Coles is trading 7.2 per cent higher compared with the beginning of July.

Meal kit company Marley Spoon has launched Wine Store, offering customers the option of pairing wines with their choice of meals.

Katy Holder, head of culinary operations at Marley Spoon, shared that the company teamed up with Kristy Farell, wine expert at Pernod Ricard Winemakers, to find “brilliant pairings” for the best meal and wine experience. 

“We know many of our customers love to cook and enjoy a glass of wine with their meal; however, we also know sometimes it can be a little daunting choosing the right wine,” said Holder.  

“Working with Kristy has been great to understand how many varietals complement and enhance our diverse local and international dishes, giving customers a drop to suit all preferences and tastes.”

According to the company, customers don’t need to worry about knowing the difference between a Rosé or Riesling as they can find the wine best suited for their meals with just a click of the button. While those who are more “wine savvy” can search by varietal to find matching wines and add them to their cart.

Customers can choose from a selection of local Australian and international wines, including brands such as Brancott Estate, Campo Viejo, Jacob’s Creek, Mumm Marlborough, St Hugo, and more. 

Rolf Weber, CEO and COO at Marley Spoon, added that launching Wine Store by Marley Spoon was a no-brainer.

“We’re excited to join forces with Pernod Ricard Winemakers, who have an impressive portfolio of wines, to give customers a convenient service they’d usually find at a bar or restaurant in the comfort of their home,” said Weber.

Moving beyond its IGA brand, Metcash is making a play at the low-cost, bulk-buy market with its latest venture Supa Valu – a range of warehouse-style supermarkets that showcase products by the pallet, as well as featuring local butchers and bakers.

With the first three stores launching across New South Wales and Victoria over the last year, Supa Valu targets a growing segment of Australians looking to find ways to cut their weekly food costs, as well as those overwhelmed by the options presented at major supermarkets.

According to Metcash’s head of Supa Valu Steven Stewart, the business came about as an effort to deliver a simple, affordable grocery experience for disconnected shoppers. 

“If you go into a [typical supermarket], there are so many messages that we’re trying to communicate to shoppers,” Stewart told Inside Retail. 

“It’s a bit out of control – from car insurance, to mobile phones, or the next multibuy deal you can get. I think customers are responding really well to Supa Valu, because it does what it says on the tin. There’s the product, there’s the price, and there are no bells and whistles.”

And while the first three stores have launched, and there are plans for more to potentially open, Stewart said he doesn’t expect to see hundreds of Supa Valu stores across the country. Instead, the business will seek to grow organically, when and where new stores make sense, rather than expanding for the sake of growth.

Keep it simple

Created in collaboration with McCartney Design, Supa Valu not only feels different to a traditional supermarket, it looks different as well. Pallets of products are placed on a largely empty concrete floor, giving customers the chance to buy in bulk, while in-house butchers make up cuts of meat based on what the business has secured. 

According to McCartney Design’s creative director Gary McCartney, Supa Valu’s customer journey is a variation of the traditional supermarket visit. 

Beyond offering fresh fruits, vegetables and protein up front where customers enter the store, Supa Valu also highlights ‘meal makers’, products such as sauces or key ingredients, which can help to cut down on confusion for customers and make the act of planning meals easier. 

“We’re literally putting pallets in front of customers, whether it be tuna fish or toilet paper, and that creates more space for big trolleys, so people are actually buying more of less – there are fewer SKUs than a conventional supermarket,” McCartney told Inside Retail. 

“That’s where the warehouse aesthetic comes from, we’re keeping it very simple.”

In taking this simple approach, Supa Valu is not only able to keep prices down for its customers, but also keeps the cost of its operations down as well – two things that are increasingly important in today’s retail environment. 

“We noticed no one else in the market was really delivering a simple supermarket experience, and it suits us really well,” Stewart said. 

“I think it’s really critical that every retailer finds a way they can be themselves, while also giving their customers what they want.”

Inflation bites both sides

Supa Valu’s wider debut comes at a time when the cost of living is rising  as a result of supply chain disruptions caused by international factors, and Australians are being warned that inflation is likely to hit 7 per cent by the end of the year, driving the cost of everyday items, mortgages and petrol prices even higher.

Low-cost supermarket Aldi has signalled further price rises are inevitable across the wider industry as its own costs go up, though it will aim to remain more affordable than its rivals Coles and Woolworths.

According to Federal Treasurer Jim Chalmers, things are going to get worse before they get better.

“A lot of people are living paycheque to paycheque, [and] inflation will be devastating because it’s getting harder and harder for them to substitute things out of their household budgets,” Chalmers said last week.

Many of Australia’s lowest paid workers benefitted from a 5.2 per cent increase to the minimum wage just a few weeks ago, but inflation is expected to outstrip that within months. It makes sense that, under financial pressure, more Australians will start looking for ways to cut costs – and after nice-to-haves like Netflix, the weekly grocery bill is likely to be next in line.

In a recent survey by McKinsey & Company, 80 per cent of respondents said they were concerned about rising inflation, and nearly 45 per cent said they have already decreased their spending in response, signalling a broad shift towards value-based purchases.

Daniel Hawkins has been appointed as Domino’s New Zealand’s newest GM of operations, effective immediately.

Hawkins has more than 20 years of experience in technology and digital leadership roles at companies such as Michael Hill and Zarraffa’s Coffee. He joined Domino’s 18 months ago as the chief information officer overseeing the business’ IT functions in both markets.

David Burness, CEO of Domino’s ANZ, said: “As a market with more than 140 stores, and a strong growth plan to build to more than 200 stores in the coming years, I am confident that Daniel is the right person to lead Domino’s through the next stage of growth and development in New Zealand.”

In his new role, Hawkins will work closely with franchisees and team members in 144 stores across New Zealand driving growth, innovation and products.

He succeeds Cameron Toomey, who has returned to Australia after four years in the role.

Coles Group has raised $1.7 million to assist not-for-profit charity SecondBite to continue delivering unsold edible food to those experiencing food insecurity across Australia.

Through the partnership, the retailer has donated unsold edible food to more than 1400 community groups across the country. Other contributions received will be spent on SecondBite’s ongoing operating expenses such as transport, fuel, and refrigeration to help deliver food.

Steve Clifford, SecondBite CEO, said the money raised will help provide vital food relief in the form of cooked meals, food hampers and community pantries.

“The importance of putting a regular, nutritious meal on the table is something we can all relate to, and clearly the need we’re seeing and hearing about resonated with so many Coles customers.”

Matt Swindells, Coles’ chief operations & sustainability officer, said: “We are incredibly proud of our partnership with SecondBite to not only help feed Aussies in need but to also help divert food waste from landfill so that we can become Australia’s most sustainable supermarket.”

Since 2011, the supermarket and its distribution centres across the country have provided around 185 million meals to SecondBite and its network of community food partners.

A new partnership between Woolworths Group and Pact will use 18,000 tonnes of recycled plastics in the packaging of the retailer’s own-brand products.

Pact Group Holdings provides specialty packaging and recycling solutions to commercial and industrial sectors.

Through this collaboration, Woolworths’ product range such as milk bottles, meat trays and beverage bottles will be made with recycled plastic taken from household recycling and container deposit schemes.

Rob McCartney, Woolworths Group MD of format & network development, said the business is working hard to remove plastic from packaging however finds it necessary to protect quality and food safety in some products.

“Across the scale of our range, the real challenge is sourcing quality recycled material in the volumes we need and ensuring it’s coming from within Australia to support the development of our local circular economy and avoid shipping emissions.”

Sanjay Dayal, Pact Group CEO and MD, said the company knows that consumers and businesses are increasingly demanding recycled and recyclable plastic packaging. “Pact is working with committed partners like Woolworths Group to drive that change.”

He added plastic packaging that is designed “effectively” can be used repeatedly creating a local circular economy.

Pact operates five plastic recycling facilities in Australia and is investing $76 million to install new technology and equipment across its packaging manufacturing facilities.

It has already supplied Woolworths with 50 million reusable and recyclable plastic produce crates in replacement of traditional single-use cardboard and polystyrene boxes.

Aldi Australia says it is inevitable grocery prices will rise further in coming months, but the German chain will look to pass as little of these increased costs on to customers as possible.

The discount supermarket aims to be between 15 per cent and 25 per cent more affordable than larger rivals but – like Coles and Woolworths – has accepted price rises across the board as producers battle rising input costs.

Aldi, which has 580 stores in Australia, expects to gain as affordability of living costs becomes more important for consumers in the next year.

Adrian Christie, Aldi’s director of customer interactions, said inflation is impacting the chain’s operations and food suppliers.

“However, Australians can be assured that every aspect of Aldi was built to minimise inflationary pressure, and pass on as little cost to customers as possible,” he told The Australian Financial Review.

“Some grocery prices will inevitably increase in the months ahead, but we want to reinforce our commitment to customers that we will maintain our price leadership relative to our competitors.”

Supermarket inflation reached 6.9 per cent in the June quarter, an acceleration from 5.4 per cent in the March quarter, and was underpinned by bread, cereals, eggs and oils, according to the latest Australian Bureau of Statistics consumer price index data.

Australia’s annual inflation rate jumped to 6.1 per cent, its highest level in more than two decades, the data showed on Wednesday.

Fruit and vegetables prices rose 5.8 per cent on the previous quarter due to flooding in key production areas of NSW and Queensland that disrupted domestic supplies.

Rabobank senior food retail analyst Michael Harvey said there had been an increase right “across the grocery basket”, and warned there was likely more to come with the peak in inflation potentially not yet reached.

MST Marquee head of consumer research Craig Woolford noted prices for packaged goods jumped to their highest in more than 30 years in the June quarter.

“Packaged grocery inflation is at 4.3 per cent compared with a 25-year average of 1.1 per cent. With round two price rises by many suppliers starting to flow, packaged grocery inflation could reach 5 per cent to 7 per cent by the end of the calendar year,” he said.

Following a consumer survey, Barrenjoey head of consumer research Tom Kierath said consumers are indicating they are likely to spend more at Aldi in the next year, at the expense of Coles, Woolworths and Metcash-backed IGA as they seek deals.

Electronics, a typically deflationary category, prices rose by 4 per cent in the June quarter. Other non-food categories like hardware, furniture and auto parts all rose.

Mr Woolford said while these categories are seeing high inflation, consumers are still spending. But he expects prices to rise further in the coming six months because many suppliers have been caught with higher transport, wage and energy costs.

“We could see another 1 to 3 percentage points of retail inflation over the remainder of 2022,” he said.

Living costs were up nearly 9 per cent in the June quarter – well above wages growth of just 3 per cent.

Aldi in the UK overnight said it would give its UK staff a pay rise for the second time this year amid the rising cost of living and as it battles to keep staff.

Mr Christie, of Aldi Australia, which only employees permanent or part-time staff with no casuals, said when asked about a pay raise for local staff that the company offers market-leading rates of pay in the supermarket sector.

“We are very conscious of the impact of inflation on the cost of living for our employees. Like our UK counterparts, we pride ourselves on the benefits including pay offered to our employees,” he said.

Coles has increased the price of its milk by nearly 20 per cent in a move that has relieved farmers, but already irritated some customers. The supermarket said it was necessary to raise the price due to the rising cost of sourcing, transportation, and packaging. 

Coles Brand Fresh White Milk 1L bottles will increase by 25c, 2L bottles by 50c, and 3L bottles by 60c, while the Coles Brand UHT White Milk 1L bottles will increase by 25c.

Michael Hampson, CEO of dairy co-operative Norco, which supplies the Coles brand Milk in Southern Queensland and Northern NSW, said that the increased farmgate price significantly impacted dairy farmers. 

“Through our long-term partnership with Coles, we have been able to support our 300 farmer members with a record farm-gate milk price increase across the total 200 million litres that our members supply to our 100 per cent farmer-owned co-operative,” he said.

“This is especially important as farmers face pressures from rising production costs, with many still recovering from the devastating impacts of recent unprecedented weather events.”

Last month, Coles signed updated contracts with 100 Australian dairy farms to supply milk directly for its brand, including an increase in the farmgate price paid by the company, with multi-year contracts for farmers. 

In addition, the company has agreed to significant increases in wholesale prices in markets where Coles Brand milk is sourced from processors, as the farmgate price the company pays to dairy farmers has substantially risen.

However, the recent increase in milk prices isn’t being taken lightly by consumers. A recent post on a Facebook group, “Simple Savers”, shared a picture of a carton of 3L milk with a $4.50 price tag that received hundreds of reactions.

Some members in the group pointed out that $4.50 was still cheap for milk, while others said it was “ridiculous” with prices that keep climbing.

Leah Weckert, chief commercial officer for Coles, said raising prices is something that the company never takes lightly. However, the increased supply-chain costs, including higher payments to dairy farmers and processors, had forced the company’s hand.

“The feedback we’ve received from farmers and processors following the recent increases in farmgate and wholesale prices has been very positive, and we hope customers will help us continue to support them by purchasing their great quality Australian milk,” she added.