Multinational food and beverage companies are very keen to make sure you don’t think their price-gouging has had anything to do with the soaring inflation that marked the last two years in grocery prices. They’re actually the victims of rising prices and the Coles and Woolworths duopoly, just like the rest of us!
“Singling out multinational food companies as playing a unique role in price inflation ignores the universal elements of recent experiences with increasing prices,” their lobby group, the Australian Food and Grocery Council (AFGC) told the recent Senate inquiry into supermarkets.
“Our negotiations occur in a concentrated grocery market in which the major supermarkets comprise a much larger proportion of our business than we do of theirs,” wrote Coca-Cola.
“We are not profiteering through price rises,” said Mars. “Coles and Woolworths have a larger market share within the supermarket sector, than other retailers such as Aldi, Costco, Amazon and IGA/Metcash. This is one of the reasons why Australia has a grocery landscape which is distinct …”
“Huge increases in input costs, friction and adjustments in global supply chains post-COVID, the impact of climate change on farming, and the consequences of global conflicts and instability have all contributed to the tremendous pressure throughout the food system,” said Nestle.
“Sales to Australia’s two largest retailers represent more than 50% of Procter & Gamble’s Australian sales,” said Procter and Gamble.
If you believe these multinationals, they haven’t passed on anywhere near all of the price rises they’ve faced, they shrink packages because consumers want a variety of different-sized products and now have smaller baskets (yes, Unilever actually said this), their profits aren’t any higher than before the pandemic, and they’re forced to sell to a duopoly.
Tragic, isn’t it, to see the likes of Coca-Cola Europacific Partners (market capitalisation US$33 billion), Mars (the world’s largest confectionery company with US$22 billion in annual sales), Nestle (US$242 billion capitalisation) and Procter & Gamble (US$390 billion) being bullied by those nasty supermarkets?
But the European Commission (EC) isn’t buying the innocent act. Last week it fined Mondelez €337.5 million (A$550 million) for anti-competitive behaviour. If the name isn’t familiar, Mondelez started life as Kraft’s snack division before it was split from Kraft’s grocery arm just over a decade ago. Some of Mondelez’ best-known brands involved in the case include Cadbury, Milka, Oreo, Ritz Crackers, and coffee brands including, Jacobs, Moccona and Douwe Egberts. The company’s local head is the chair of the Australian Food and Grocery Council.
The EC’s probe began when investigators raided Mondelez offices across Europe in November 2019. According to the Commission, Mondelez took part in 22 anticompetitive agreements between 2006 and 2020. Specifically, the EC said Mondelez limited the territories or customers to which seven wholesale customers could resell its products. One agreement also included a provision ordering Mondelez’ customers to apply higher prices for exports compared to domestic sales.
Mondelez, you see, was particularly aggrieved that wholesalers and retailers in one country might sell into another, undercutting Mondelez’s local deal. For example, it stopped supplying chocolate bars in the Netherlands to prevent them from being imported into Belgium, where Mondelez was selling them at higher prices.
“Prices for food differ between member states,” said Margrethe Vestager, executive vice president in charge of competition policy at the EC. “Trade over borders of member states in the internal market can lower prices and increase the availability of products for consumers. This is especially important in times of high inflation. In today’s decision, we find that Mondelez illegally limited cross-border sales across the EU. Mondelez did so to maintain higher prices for its products to the detriment of consumers.”
Mondelez now claims the penalty related to “isolated incidents, most of which ceased or were remedied well in advance of the commission’s investigation.” Except, those “isolated incidents” (all 22 of them) continued after the raids were launched on the company’s European offices in November 2019.
At the end of April, the Chicago company revealed it had lifted its gross profits in the quarter off the back of a 6% price rise across its products, although the price rises had seen consumers cut sales volumes by 2%.
See — not gouging at all.
