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Coles has asked some of its suppliers to cut their prices to reflect cooling inflation, with those savings likely to fund a discounting blitz just as the supermarkets face political and community heat over food and grocery prices.

Suppliers have told The Australian they have been asked to prepare for price reduction requests of as much as 14 per cent – especially in the non-food area – on some products.

Coles has pointed to the improving inflationary outlook, especially in key cost pressure points such as freight, shipping and raw materials, to justify unwinding years of price hikes.

Winning price cuts from suppliers will allow Coles to pass on some of the savings to shoppers – and potentially pocket some for the benefit of its 440,000 shareholders – and comes as Coles and Woolworths face public inquiries over prices and market power.

Some suppliers have been contacted about a new Down, Down campaign that will see a fresh round of price cuts. These are currently designed as 13-week campaigns for autumn, winter and spring, and will see prices squeezed across a range of food and grocery categories.

Suppliers have been asked to help fund the reductions by taking price cuts themselves.

The supermarket shelf-price falls are ­between 5 and 20 per cent.

The supermarket giants face an uncertain year with a raft of high-profile political probes and inquiries piling pressure on the retail ­behemoths to explain elevated ­prices and earnings amid accusations of profit gouging.

The political heat around Woolworths and Coles ratcheted up late last year.

A Greens-led Senate inquiry into supermarkets was announced, followed by an inquiry by the competition regulator and a gouging report from the ACTU. The supermarket chains responded by spruiking their discounting and promotions campaigns, and slashing prices on key food and grocery items.

Coles began a sales campaign in January centred around meat and Woolworths has also cut meat prices.

Suppliers are, however, likely to push back against the request for price cuts from Coles, citing labour and energy costs, which are still rising, even if freight and shipping is getting cheaper.

A Coles spokesman declined to comment on its communications with its suppliers and negotiations around prices, but stressed the supermarket was squarely focused on lowering prices for its shoppers.

“We are working hard to keep grocery prices affordable for ­customers, particularly as they face escalating living costs with higher mortgages and rents, and increasing expenses like energy and fuel.

“We are always looking for ways to lower the cost of groceries and invest in value through campaigns like Down, Down and thousands of weekly specials.

“Coles has kept price inflation in its supermarkets below the rate reported by the ABS for the past 16 quarters.”

For years suppliers fought for and won price rises in the face of rocketing inflation and higher input costs to manufacture groceries, such as raw materials, energy and labour.

In its submission to the ­Senate inquiry Coles reported that in the first six months of 2021 it received 1101 requests from suppliers for cost increases, equivalent to around 42 per week, and that almost doubled to 79 per week in fiscal 2022 and 73 per week in fiscal 2023, ­largely driven by inflation and increases in global commodity prices.

Any price reductions it can now win back from suppliers will involve a fresh round of negotiations but Coles will point to falls in costs – although labour bills continue to grow – to justify the move.

Many of the suppliers fought to get price rises through Covid and the recent inflation spike, but will likely play hardball and resist a reversal of that, citing a range of input costs that remain elevated.

Even if these lower shelf prices for shoppers trigger a lift in sales volumes, many suppliers believe it won’t be enough to cover the ­reduced prices they get from the ­supermarkets and the funding they need to put towards ­specials and promotions such as the Down, Down campaign run by Coles.

The challenge for Coles chief executive Leah Weckert and her board will then be dividing those savings between consumers (in the form of lower shelf prices) and its investors (through better profits and dividends).

In its submission to the Senate inquiry, Coles underlined the importance of returning profits to shareholders, but that this also needed to be balanced with providing a competitive offer to shoppers.

“Of our more than 440,000 shareholders, 88 per cent hold less than 2000 shares,” Coles said in its submission.

“They include mums, dads, families and retirees who not only shop with us, they invest in us and rely on our long-term sustainability.”

In its Senate submission, the Australian Food and Grocery Council said it supported the ­aspiration of keeping consumer prices low, but this should be shared by the supermarkets.

“It should not be suppliers who disproportionately shoulder risks and costs, but a contribution balanced between retailers and suppliers,” the AFGC said.

“Since 2021, Australia’s major supermarkets have maintained profit margins of between 5 and 6 per cent, compared to between 3 and 4 per cent for Tesco and Sainsbury’s in the more competitive British market.”

The AFGC said between 2011 and 2021, input costs for food manufacturing rose at double the rate of output prices.

Woolworths Group MD and CEO Brad Banducci is set to retire in September, coinciding with the supermarket chain’s 100th anniversary.

Banducci will retire after serving the company for 13 years, with eight and a half of those as CEO.

Woolworths has named current MD of WooliesX Amanda Bardwell as MD and CEO, effective September 1, following the release of the company’s annual financial results.

“It has been a privilege to be a member of the Woolies team and one I have never taken for granted. We have a wonderfully talented and passionate team at Woolworths Group as personified in Amanda Bardwell and I look forward to working with Amanda and our team over the next few months as we set ourselves up for the next chapter,” said Banducci.

“Amanda is a proven leader, business builder and modern retailer. Most recently, under her leadership, WooliesX has gone from infancy in 2015 to a $7bn market leading business. Amanda is highly respected throughout the organisation and I know, like Brad, will live our purpose and work hard to achieve Woolworths Group’s full potential,” said Woolworths Group chair Scott Perkins.

The announcement comes as Woolworths faces pressure over its price-setting practices along with its rival Coles, and the market power of major supermarkets in Australia.

A Senate Inquiry is underway, with a report due to be released in May. In addition, the Albanese Government has launched an ACCC inquiry into supermarket prices.

In a LinkedIn post, Banducci wrote that his decision to retire is not related to the upcoming price inquiries.

“This is a decision I have been contemplating for a while especially given it is literally 8 years since my appointment and as we go into the Woolworths Centenary and the timing felt right,” he wrote. “Not because I am tired or burnt out (I am as energised by our business and our potential as I have ever been) or [a]m worried about the various upcoming price inquiries (I am looking forward to effectively representing Woolworths at these important forums) but because I think a leader should go before they need to and, more importantly, because I believe passionately in the amazing talent in our Group and it is time to pass on the baton.”

KMD Brands says it expects significantly lower sales in the fiscal first half, reflecting weak consumer sentiment.

The group forecasts sales to decline 14.5 per cent year over year to $469 million amid lower expected sales across all three brands.

The company forecasts Rip Curl and Kathmandu’s sales to fall 9.2 per cent and 21.5 per cent, respectively. It also estimates a 20 per cent decrease in Oboz’s sales.

Meanwhile, the group’s gross margin is anticipated to remain resilient at 58.8 per cent.

“Rip Curl and Oboz are recycling record sales last financial year and while revenues from the direct-to-consumer channel for these brands are showing single-digit declines, the wholesale channel has been more challenging as wholesale accounts reduce inventory holdings,” said KMD Brands CEO and MD Michael Daly.

“Kathmandu has experienced softer trading results since June 2023. A combination of weaker consumer sentiment, the warmest winter on record in Australia and the brand’s resilience on winter-weight products has resulted in a disappointing first half.”

The company is optimistic that the Rip Curl and Oboz wholesale channels will improve next year.

In addition, it is looking forward to a better performance for Kathmandu in the second half of next year as the company will launch new products, quick-to-market programmes, increased visual merchandising, more personalisation through Out There Rewards, and an expanded third-party brand strategy.

Retail Food Group swung to a net income despite lower revenue in the fiscal first half, thanks to an increase in average transaction value and the company’s acquisition of Beefy’s Pies.

RFG’s net profit stood at $5.1 million while revenue fell 1.4 per cent year over year to $61.9 million during the six months ended December 29 last year.

Earnings before interest, taxes, depreciation, and amortisation soared 121.3 per cent to $11.6 million.

The cafe, coffee, and bakery segment’s domestic network sales slid 0.1 per cent to $180.9 million while same-store network sales climbed 3.2 per cent to $168.8 million.

The quick-service restaurant segment’s domestic network sales declined 5.5 per cent to $73.9 million while same-store network sales dipped 1.3 per cent to $70.7 million.

RFG opened 70 new outlets during the first half. In addition, the company completed in December the acquisition of Beefy’s, which contributed an EBITDA of $100,000 in 19 days.

Beefy’s is set to open its first new outlet under RFG in the second half, replacing a previous high-performing closed Brumby’s outlet.

“We understand the challenges in our QSR segment and have actions in place to drive frequency and attract new customers through product innovation, investment in technology and value,” said RFG CEO Matt Marshal.

For the full year, RFG forecasts underlying revenue to grow 8 per cent to 16 per cent to between $110 million and $118 million.

Underlying EBITDA is expected to range from $28 million to $32 million, up 11 per cent to 26 per cent.

Quadrant Private Equity is nearing a sale of Superior Food Group, the food services distribution business that it placed on the market in December.

The private equity firm is in advanced discussions with a buyer for Superior Food, pitched last year as a defensive opportunity to big-name sponsors like Bain Capital and Blackstone. But Street Talk can reveal another party is in pole position – ASX-listed grocery wholesaler Metcash.

The Doug Jones-led group flagged in its December half-year results that it had a “significant pipeline of strategic growth opportunities” and “M&A”. Of note, it was in talks to acquire Superior Food alongside Coles in 2022 but bowed out of the sale process.

Metcash is understood to be advised by Barrenjoey Capital Partners and Herbert Smith Freehills. Stanton Road Partners tended to Quadrant. A deal has not yet been signed but is “well advanced,” sources said.

This is the third time Quadrant has shopped Superior Food around – the first in 2021 after the competition regulator decided to approve Woolworths’ entry into the sector via PFD Food Services and again in 2022, asking banks to pitch for a potential initial public offering. However, both processes were interrupted by the COVID-19 pandemic and associated lockdowns and then Russia’s invasion of Ukraine, which froze markets.

Prospective buyers have been told Superior Food, which supplies ingredients, packaging and cleaning items to restaurants, cafes and aged care homes, is on track to make EBITDA in the 2025 financial year of around $55 million. That would imply a sale price north of $500 million, based on recent transaction multiples.

Woolworths took a $552 million chunk of PFD in 2020 about 11-times PFD’s pre-pandemic earnings of $57 million. The other big player in the space is Bidfood Australia.

An exit would end Quadrant’s eight-year association with Melbourne-based business. The buyout firm invested in August 2015, swiftly merging it with Sydney’s NFD Food Services to create the third-biggest food services group in Australia. Its clients include fast-food restaurants like Domino’s, Hungry Jack’s and Subway and corporates like the Royal Automobile Club of Victoria and Health Purchasing Victoria.

Quadrant executive chairman Chris Hadley and managing director Alex Eady sit on Superior Food’s board. A spokesperson for Metcash declined to comment. Metcash has a market capitalisation of $3.45 billion and last traded at $3.64.

Australia’s wholesale food service sector has provided rich pickings for private equity. Adamantem, which owns Boost Juice and Betty’s Burgers, has invested in wholesale food packaging supplier PAC Trading while PAG Asia Capital, best known in Australia for owning Oporto and Red Rooster parent Craveable Brands, acquired Patties Foods and Vesco Foods just over 18-months ago.

Burger brand Grill’d is partnering with former tennis World Number 1 and three-time Grand Slam champion

Ash Barty to launch a limited-edition range of Barty Burgers.

The burger chain will also donate $100,000 to the newly launched Ash Barty Foundation, through its Local Matters program.

The goal is to make a positive impact on the lives of young Aussies through sport and education initiatives.

Ash Barty said “Promoting physical activity and wellbeing amongst young people is incredibly important to me. I’ve been given some amazing opportunities in my tennis career so to help create pathways for kids to participate and enjoy sport is invaluable.

“I’m grateful to Grill’d for supporting my foundation and hope that together we will be able to make a difference to many young Australians.”

Grill’d founder and managing director, Simon Crowe, said “We are honoured to be collaborating with one of Australia’s most accomplished athletes on this initiative. As a role model to millions of Aussie kids and actively involved in community work, having Ash front this campaign is a perfect match to Grill’d’s local community and charitable efforts.”

Grill’d customers also have a chance to win an exclusive Ash Barty tennis experience for two in Queensland.

The Barty Burgers range features a choice of chicken or beef patties, a mini pack including chips and a drink, and two meal packs.

Skincare brand Sukin has been acquired by PNB Consolidated, a company headed by former BWX Group CEO John Humble.

Greenhill launched a comprehensive sales process for the assets, which include BWX Group’s manufacturing facility in Victoria.

PNB Consolidated is believed to have paid $70 million for the assets, The Australian reported. Sought for confirmation, a KPMG representative said he “cannot disclose the actual value but yes, that figure is in the ballpark.”

BWX collapsed and entered voluntary administration in April last year, with KPMG Australia subsequently appointed receiver.

Meanwhile, KPMG Australia’s restructuring services partner David Hardy said that PNB Consolidated will provide the ideal platform for Sukin to thrive moving forward.

“We are delighted to announce the sale of the Sukin brand. Importantly, we have been able to reach an outcome that keeps both this wonderful brand and high-end manufacturing operations together,” said Hardy.

“PNB Consolidated brings a strong pedigree in the manufacturing and distribution of health and wellness brands.”

Greenhill and Norton Rose Fulbright served as advisers of KPMG for the sale of Sukin.

The pricing practices of Australia’s supermarket near-duopoly are about to the the focus of a year-long enquiry by the government’s competition regulator, the Australian Competition and Consumer Commission (ACCC).

The investigation will include the pricing practices of the supermarkets and the relationship between wholesale – including farmgate and retail prices.

The ACCC will examine competition in the supermarket sector and how it has evolved since the previous inquiry in 2008. 

Moreover, the inquiry will also explore emerging issues such as online shopping, technological advancements, and loyalty programs.

“We know grocery prices have become a major concern for the millions of Australians experiencing cost of living pressures,” says ACCC chair Gina Cass-Gottlieb.

“When it comes to fresh produce, we understand that many farmers are concerned about the weak correlation between the price they receive for their produce and the price consumers pay at the checkout.”

She said the group will use all of its legal powers to conduct a detailed examination of the supermarket sector and identify opportunities for improvement. 

“We will carefully consider what recommendations we can make to the Government,” added Cass-Gottlieb.  

Following the ACCC’s inquiry in 2008, Coles and Woolworths provided enforceable undertakings to remove restrictive tenancy provisions that may have prevented shopping centres from leasing space to competing supermarkets.

The regulator’s investigation resulted in identifying more than 700 potentially restrictive leases.

ACCC deputy chair Mick Keogh said their inquiry will examine the current environment between supermarkets, as well as barriers to greater competition and new entrants in the sector.

“Competitive markets encourage more attractive combinations of price and quality for consumers, as well as greater choice,” explains Keogh.

“We believe we are well placed to conduct this broad-ranging inquiry and will bring to bear our expertise in competition, consumer law, agriculture and the supermarket sector in particular.”

Commenting on the latest inquiry, Woolworths Group CEO Brad Banducci said the company noted the Federal Government’s decision and “welcomes the opportunity to assist” the ACCC.

“We know many Australian families are doing it tough and looking for relief at the checkout,” remarked Banducci. 

“Food inflation has continued to moderate in recent months, and we expect this to continue throughout 2024.”

The ACCC expects to publish an issues paper in February seeking views on the key issues it will consider in this inquiry.

The Australian Government will provide an interim report later this year, and the final report will be given early next year. It will also publish the formal direction from the Australian Government, including the terms of reference, when it receives it.

Riverina-based Meditrina Beverages has agreed to acquire the assets of Warburn Estate, Australia’s eighth-largest winery.

The sale, which is expected to close in March, will include Warburn Estate’s land, plant, equipment, cellar door, and trademarks and intellectual property.

“The Sergi family has been an integral and respected leader in the wine industry in this region for over 55 years, and we hope to build on their good work. We wish them well in their future endeavours,” said Anthony Taliano, MD at Meditrina Beverages.

“It is time for us to step back, and to focus on our family. We welcome the Taliano family into the wine industry and know their passion for agricultural-based business in the local region, the brands and history of the company will continue under their family ownership,” added Antonio Sergi, fourth-generation of the Sergi family which owns Warburn Estate.

Warburn Estate, whose brands include Rumours, Gossips, and Droplet, exports to almost 30 countries.

Orlando Rodriguez, the boss of Coca-Cola’s Australian bottling business, is always on the job. Before he even sits down for our interview he notices the cafe’s soft drink and water products are supplied by a rival. That’s how he knows that the lonely can of Coke sitting on the adjacent table is one that a customer must have brought in and left behind.

“It happens everywhere. People prefer a Coke,” Rodriguez said.

“For the last 85 years the brand on the door is what we anchor to,” Rodriguez said. “People often say, ‘doesn’t it sell itself?’ [It’s about] continuing to find those pockets where you can grow.”

One of those pockets is the soft drink giant’s sugar-free options. The manufacturer has been pivoting away from sugar for years: about 45 per cent of its drinks sold in 2022 were low- or zero-calorie. Coke Zero and Coke Classic are neck-and-neck.

“If you live around here [in North Sydney], it’s probably 60 per cent Zero Sugar, 40 per cent Classic. If you’re in Penrith at the Leagues Club, it’s the inverse,” said Rodriguez.

“Unless you’re an absolute fanatical Coke drinker, the taste is becoming really, really close.”

Energy drink Monster has been earmarked as their second-largest growth driver. The focus is to wrest market share away from its closest rival, V, by aligning with high-octane sports players, from motorbikes and surfing to UFC and AFL and e-sports gamers.

“Monster is associated with that. You won’t see them advertise on TV, but they’re really youth-prevalent gaming sports so they’re doing really, really well.”

Meanwhile, sports drink Powerade commands 50 per cent of its market and is riding the long-term growth trend of fitness and performance, while its water brand Mount Franklin is growing through citrus-flavoured sparkling water. CCEP has a presence in the coffee market through Grinders, sold primarily in supermarkets, and until recently, grab-and-go iced coffee Barista Bros, which was discontinued in July this year.

“We thought it was a really strong offering, but it didn’t appeal broadly enough,” Rodriguez said. Australians tend to prefer fresh milk, while Barista Bros was made from long-life or UHT milk. “After eight, nine years, we were still number four and number five player. And when we’re in a category, we want to be number one or number two.”

Keeping the company’s brands front of mind for consumers is crucial. Coca-Cola is said to spend more on global advertising and marketing than any beverages maker, but getting in front of consumers’ eyes is not as straightforward as it used to be.

“When I grew up, the ads on TV had the biggest cut-through, what you heard on the radio had the biggest cut-through. People are consuming differently now. It’s your social media feed that’s playing a much bigger role; platforms like TikTok and YouTube have a much bigger reach,” Rodriguez said.

The beverages giant also will push further into alcohol in the coming years. Suntory Beam’s alcohol brands, which Coca-Cola has been operating under a 16-year contract, is due to end in mid-2025, meaning CCEP will lose the likes of Jim Beam, Canadian Club and Midori from its portfolio.

“What we do know is that we will participate in the alcohol category,” Rodriguez said. “That’s an exciting part of our future growth, but it’s a path we’ve got to navigate through.”

The hardest part of the job, according to Rodriguez, is keeping the team focused on growing brands that already lead the world.

“We have the best read in the market,” he said. “We have a review of every channel, whether you’re at an airport, whether you’re buying from vending machines, whether you’re in a [quick-service restaurant] like McDonald’s, a cafe like this, or in your local supermarket. We have a read of where every movement is.”