AU: Agricultural lobbyists to join forces against large supermarkets
In an interview with ABC News, NWS farmer representative Peter Darley noted that corporations like Woolworths (ASX: WOW) and Westfarmers (ASX: WES) are using their monopoly market power to put farmers in a pinch. “They’re forgetting about the farmer,” Darley said. “He’s the guy that’s taking all the risk, producing all that product and hoping that he’s going to get a fair price for his cost of production.” Other middleman companies like Metcash (ASX: MTS) and BEGA Cheese (ASX: BGA) could also find themselves in the crossfire of margin maximization battles.
The Australian Competition and Consumer Commission (ACCC) is currently investigating improper behaviour by supermarkets, but the Australian National Retailers’ Association denies any wrongdoing. A spokeswoman told ABC that she would “heavily dispute” any accusation of deteriorating relationships, and noted that many farmers enjoy long-term relationships with supermarkets.
The ACCC will ultimately determine which part of the supply chain stands in the right. For now, investors should continue to keep a close watch on this price war. Grocery store margins are infamously thin, and any realization that a company has artificially been inflating theirs should be reason enough to revise an investment thesis.
Source: fool.com.au
