It’s a challenging time in the food and beverage industry for any CEO, but especially so if you also have a key role in the industry’s peak body.
Terry O’Brien, MD of Simplot Australia and the new chairman of the AFGC, agrees, however he believes he’s also ideally positioned to make a mark.
“The industry is deserving of representation from the most representative people in it and I feel Simplot is a pin-up company for the diverse membership of the AFGC,” O’Brien says.
So what’s on his mind as he takes the chair? He points to the huge squeeze on suppliers in the grocery industry, thanks to the combined pressures of rising imports, the increasing costs of manufacturing and the highly competitive retail market in Australia.
“There is big potential for collateral damage to the suppliers of the grocery industry – our members,” O’Brien says.
In fact, he believes that many Australian businesses will not survive the current level of pressure, at the ultimate expense of the Australian consumer.
“I don’t expect retailers to support unsustainable or unprofitable businesses – it’s not their job – but at same time, the consumer needs to make that choice for themselves,” O’Brien says.
“Are consumers happy to rely on overseas imports from a food quality or food safety perspective? I’m not sure the average punter understands the size of that issue,” he says.
O’Brien stresses he’s no “retailer basher”, but he says he does want to ensure that everyone is “aware of the potential impact and potential long-term scenario if we are not careful in this current environment.”
This includes alerting consumers to the medium to long-term fallout of current practices, he says.
To be able to continue to provide these sorts of price levels, the retailers will have to find efficiencies, and one way is to reduce the number of ranges, according to O’Brien.
Another is to pass on costs, which is fine in principle, except when it involves shifting the cost of their own inefficiencies onto suppliers.
“Whenever there is a cost shift with no reasonable basis, the AFGC has a role to try represent smaller suppliers, to help put the balance back into the equation with those big retailers,” he says.
As part of its voluntary code negotiations, the AFGC is also trying to agree with the retailers on processes for making far-reaching decisions that affect suppliers, such as when making a transition to private label, or moving away from Australian-made products in favour of imported goods.
“If there’s a process in place that the retailers and suppliers have agreed to ahead of time and followed, it minimises the damage done on the way through,” O’Brien says.
“It gives people time to adjust and make other arrangements, rather than just have things drop off the page on a day and damage their business irreparably.
“We’re not saying for one moment that the retailers don’t have the right to make those decisions – it's their real estate – but we are saying let's follow a process that does the least harm to everyone.”
O’Brien says he hopes the
AFGC will have a strong voice when it comes to identifying
unreasonable demands. “Those demands are impacting the majority of
the AFGC’s members, and it has a right to represent them,” he
says.
