For Coles CEO Steven Cain, while aspects of supply were improving, it was still “hit and miss”, with ongoing international freight issues and recent domestic flooding contributing to the fragility of the system.
Speaking at the The Australian Global Food Forum, Cain said current fresh fruit and vegetables prices were being driven by factors more linked to commodity costs than labour ones. Labour cost increases are yet to flow through the system and will flow over the next 12 months, he said.
“We’ve had five times the requests for price increases as we had last year and they’re not small amounts. It is not two or three per cent being asked for. There is the usual ‘pig in the python’ working its way through the system, whether they plateau or come down slowly remains to be seen,” Cain said.
The latest OECD consumer price index (CPI) figures for Australia showed inflation on food in April increased 4.8 per cent on April 2021, with CPI overall increasing 5.1 per cent year on year.
For the OECD overall, inflation rose 9.2 per cent year on year. Food price inflation was 11.5 per cent in April, up from 10 per cent in March.
He added that after many years of increases in parts of the meat industry, pricing in that market is beginning to soften, while there are expectations this will be a bumper year for farming, which will hopefully help moderate those prices.
He pointed out that while 80 per cent of Australians have more savings than they ever had, the other 20 per cent are doing it “incredibly tough”.
“Foodbank, Second Bite and other food rescue agencies are so important.
“We’ll see people shifting from food service to supermarkets and in supermarkets into own brand ranges for traditional items like pasta,” he said.
Labour pains
Labour is the single biggest issue for the company, Cain said.
“We do have a labour crisis in Australia in many sectors and it is being compounded by Covid and the flu. Our absenteeism today is twice our normal and churn rate in most industries is increasing.
“I was talking to a store manager last week and they said the greatest challenge is finding the right people with the right skills,” he said.
Cain said one of the difficulties is staff leaving for jobs that provide greater flexibility and free time.
It was also being felt across the sector, describing a large supplier in rural Victoria that has delivered in full on time, but is only at 13 per cent because they can’t get enough labour.
Automation gains
The dividends of a decision to invest in automation soon after its demerger from Westfarmers is starting to pay dividends, with the retail giant bringing online four of the largest automated facilities in the country within the next year.
The two Ocado facilities in Melbourne and Sydney will add $1.5 billion of home shopping capacity, and the Witron automated Distribution Centres in Brisbane and Sydney, which can process four million cases a week from broadly 70,000 square metres.
“The Ocado facilities have twice the range of a normal supermarket and remove the issue of not being able to deliver orders in full on time – with Ocado we have twice the range and twice as good at delivering in full on time.”
