More moans from the business sector this week: Metcash boss Andrew Reitzer bitched about the price-cutting activities of Coles Group and its UK CEO, companies whinged about the carbon tax before we see what the level of tax is, and more moaning from the food industry about nasty Coles and its price cutting and naughty imports.
Earlier this week Terry Davis, CEO of Coca-Cola Amatil, got some publicity for warning that Australia could become highly dependant (actually entirely) dependant on imported food.
“Coca-Cola Amatil chief Terry Davis has warned Australia is in danger of becoming entirely dependent on imported food, as the strong Australian dollar and retailers’ focus on driving prices down makes it impossible for local manufacturers to compete.
“Mr Davis also warned that the federal government’s proposed carbon tax could further undermine the competitiveness of Australian manufacturers.
“Speaking at a business luncheon organised by the Australia-Israel Chamber of Commerce in Melbourne yesterday, Mr Davis said the shift to private-label products among supermarket retailers had driven prices so low that some local brands had ceased to exist.
“Australia is getting very far down the route where we will not have any food manufacturers in this country, because of the lack of encouragement at the retail level and the lack of encouragement at the consumer level,” Mr Davis said.
“We’re only just starting to talk about food security in this country, and we will lose it when the mining boom finishes and our Australian dollar isn’t worth one US dollar, and we have to import products that will be 40 and 50 per cent dearer than they were before.”
That, of course, very silly because it will never happen. Australia produces food in this country and companies will go on manufacturing in this country. According to Davis’ argument, no one would be making bread and associated products, milk would not be turned into drinking milk and other products, meat would not be converted into various products. It will all be imported. What a crock of rubbish from a leading businessman who has spruiked wine, beer and soft drinks, some of which were imported.
And, by the way, the level of private labels in Australia is low compared with the UK and the US. And consumers benefit from this with lower prices for similar products.
But don’t you think it’s a bit rich that one of the biggest importers of food products into this country is warbling on about this subject? Of course I use the world’ food’ as advisedly.
Davis’s company actually imports obesity-causing products, including alcohol. Coca-Cola Amatil imports all the syrup for its ubiquitous product, especially as Coca-Cola (in its various guises) into Australia from the 30% shareholder, the Coca-Cola Company of Atlanta.
CCA is a manufacturer and importer. According to the 2009 annual report (the full 2010 annual report isn’t available), the company imported at least $729 million worth of product from the US company, and probably another $126 million, which was owing at December 31, 2009. This stuff is used in Australia, NZ, PNG and Indonesia where CCA has operations. CCA is in fact one of the single biggest importers of “food” into Australia. The product is the syrup for Coke and its variants.
The company told the market last month that the concentrate makes up 34-40% of the cost of each of its products, which is the largest single cost for each product.
CCA and Davis would argue that the syrup can’t be made here. Well, it can be, it’s only the obsessive security concerns of the parent (and the fact that controlling the Coke formula and syrup gives it total control over a company in which it only has a 30% stake) that stops the stuff from being made here.
In fact Davis has pushed CCA deeper into the grog industry via a joint venture with SABMiller, which includes a local brewery, but also included SABMiller’s fleet of imported beers, plus joint ventures and distribution agreements for a host of hard-liquor products. In fact the higher value of the Australian dollar has allowed the joint venture to improve its margins and invest more because it has made the cost of the imported product cheaper.
Overall, Davis’ multimillion dollar salary and his company’s current business strategy is highly dependant on imported products.
And he had the hide to warn that we face the prospect of being “entirely” dependant on imported food. Davis and his company and its US parent are part of the problem he claimed to have identified, and not one journalist has challenged this absurd claim from a major “food” importer.
And why is Davis moaning about the private labels of the supermarket chains? His is the one company that has the range of soft drinks, especially Coke, that all retailers need for its brand name. Private label or cheaper colas have been tried (Pepsi, Crown etc), and have fallen short. And there are no chances of private label Coke from CCA or its parent.