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Coles Pressuring Suppliers To Eat Inflation Costs

Coles is privately appealing to its suppliers to cut costs rather than rise prices, saying it will block any requested price rises that impact the supermarket’s sales.

In a note sent to its suppliers, the supermarket giant warned it won’t be entertaining price rises unless they are justified.

“All businesses will incur impacts to the cost of doing business at some point,” the note reads.

“Every business needs to turn its mind to how it can remove costs from its operations. This is something that Coles continually does and is a fundamental part of our strategy.

“Even where you can substantiate increases to cost of doing business including rising cost of inputs, Coles may not accept your request for a cost increase in full or at all.

“Coles must balance customer needs, Coles value proposition and the competitive environment. Your organisation needs to be continually reviewing how you operate to offset costs.”

Coles supermarket signage in Sydney, Friday, Feb. 24, 2017. (AAP Image/Joel Carrett) NO ARCHIVING

A Coles spokesperson separately confirmed that “if there is merit in the request and it’s based on raw material or packaging ­increases for example, we will ­accept it,” adding all requests to hike prices are dealt with on a case-by-case basis.

The letter to suppliers noted: “Coles considers that where there have been decreases in commodity input costs for suppliers, these should generally be reflected in cost reductions to Coles.”

Last week, the supermarket posted a rather modest 1.3 per cent leap in revenue for the September quarter.

Coles said food inflation climbed 7.1 per cent during the quarter, following a 4.3 per cent jump in the June quarter. This hike “continued to be driven by bakery, reflecting higher wheat prices, and fresh produce, particularly in fruit such as berries and bananas,” Coles said, noting that ‘fresh inflation’ was 8.8 per cent for the quarter.



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