Australian food merchandisers are standing firmly against supermarket group Coles’ proposed moves to reduce the use of independent field representatives by companies that supply Coles. Coles’ plan would replace many of the Association of Sales and Merchandising Companies Australia’s (ASMCA) members with Coles’ own panel of agents, according to the peak industry body Chairman.

“We’re strongly against it. All of our members are strongly against it,” Paul Meyer, Chairman for ASMCA, told Australian Food News today.

“We have not had a single member who is in support of the idea. However, a lot of them feel obligated to go along with Coles because they’ve got such a large business with Coles. They can’t afford to lose it, so they have to be part of the process whether they like it or not,” Mr Meyer said.

The proposed restructure, which will reportedly apply to Coles supermarkets as well as Coles Express convenience stores and liquor outlets, would see Coles charge merchandising companies a fee for the time they spent in store. The restructure would also mean that only Coles accredited merchandisers would work in the supermarkets, and that merchandisers would have to provide Coles with all the data they collect.

“The details are very sketchy at the moment. In fact, Coles probably don’t even know themselves what model is going to work,” Mr Meyer said. “From the sound of it, it’s quite restrictive, and is an extremely dramatic change with what presently happens,” he said.

Currently, merchandisers are paid a fee of around 1 to 2.5 per cent of sales by food manufacturers for their services ensuring manufacturers’ products are stocked and displayed according to contractual arrangements. Supermarkets currently charge no fees to merchandisers.

New system will ‘increase costs’

The ASMCA Chairman said the proposed structure would increase costs, not reduce them as Coles has suggested.

“We’re unsure where the money’s going to come from,” Mr Meyer told Australian Food News. “Our merchandising companies run on extremely thin margins. Manufacturers certainly don’t want to pay any more money. They feel that they’re paying enough in fees and charges to Coles,” he said.

Divide and rule

Mr Meyer said the ASMCA was also concerned that Coles did not have enough staff to administer the proposed system, and that it would create division in the merchandising sector.

The ASMCA said it understands that just four or five of the larger merchandising companies are involved in the development of the proposal with Coles. Mr Meyer said that there were between 25,000 and 30,000 merchandisers and field force representatives across Australia who would all be affected by any initial changes Coles made, and that the impact would likely “snowball” down through the rest of the industry.

Restricted choice and more power to Coles

ASMCA said it was concerned that the proposed new system would reduce competition in the industry and effectively allow Coles to set a price on merchandising services.

“At the moment, manufacturers have got a choice,” Mr Meyer said. “And there’s no doubt that this proposal will restrict that choice,” he said.

Smaller suppliers more vulnerable

The ASMCA said reduced competition in the merchandising sector could potentially affect what appears on supermarket shelves.

Mr Meyer said he understood that it was mainly larger merchandising companies – whose higher fees smaller food manufacturers might not be able to afford – that are involved in development of the plan with Coles.

Mr Meyer said the ASMCA had already met once with Coles about the proposal, and was due to meet with the supermarket again in the coming weeks to discuss it in further detail. He said he understood that Coles had allowed a period of two years for development of the proposed restructure.

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