Sunday, August 30, 2009

The Woolworths/Safeway debate rolls on

The debate is continuing over whether or not the announcement by Woolworths that it plans to reduce the brands of cage eggs it sells will result in more free range sales.

This article appeared in the Moorabool News, a local newspaper distributed throughout the Bacchus Marsh region of Victoria.

Woolworths has free
range on eggs

By Kate Green
Barn laid eggs could be on the menu in more Moorabool households following a decision by supermarket giant Woolworths to cut the number of cage-laid eggs on its shelves.
Despite higher cost to the consumer, averaging $2.00 more per carton of 12 for free-range or barn laid eggs, cage eggs have lost a market share of 1.5 per cent per year since 2000.
Woolworths is phasing out its 'Woolworths Select' caged eggs, cutting the number of cage-egg brands it sells from 15 to 11 and continuing to sell 28 barnlaid and free-range brands.
Vesna Luketic is the Managing Director of Myrniong based business Family Homestead Genuine Free Range Eggs and explains that the decision to reduce cage laid egg brands is more likely driven by improving profit, not animal welfare.
"This will not speed up a consumer-driven switch to free-range & barn laid, in fact this will only give Woolworths greater negotiating power within the industry to drive prices of eggs down, which will only affect the farmer.
"If there are only 11 brands/lines, this means that the competition within the industry to supply these cage eggs will become even more competitive and fierce, which will only drive down the price, which will not be reflective on the supermarket shelves for the consumer, but will allow a greater margin for Woolworths, and in turn will impact the farmers bottom line.
"If 80 per cent of eggs sold within Australia are in fact cage eggs, can you imagine the price bargaining power that Woolworths will have?" she asked.
Ms Luketic also refuted Woolworths' claim that reducing the number of brands of cage eggs it sells will increase sales of barn and free-range eggs.
"The concept of supply and demand is simple. If the consumer wants to purchase cage eggs, a choice usually price driven, then it doesn't matter if there are 20 brands to choose from or 11 brands, that consumer will still purchase cage eggs. Therefore the level of sales for cage eggs from Woolworths will not decrease.
"It is the Australian consumers who are more aware and pushing animal welfare issues that have been driving the increase of free-range egg sales in Australia.
The rate of change occurs due to education and awareness of animal welfare issues and overall consumer support of business that are animal and environmentally friendly," she said.
The debate over accredited free-range eggs and barn laid eggs also continues.
Ms Luketic explained that barn laid factory farmed eggs come from free range hens housed in large sheds which may never go outside and these eggs come off conveyor belts.
"If the consumer was really aware that they were paying more for eggs produced under these types of systems they would most likely not buy them.
"The cost of 'genuine freerange' farming is extremely high, production costs are greater and such farming is very labour intensive. Margins are already extremely low and here we have Woolworths already waiting at the bit to reduce prices. The price needs to be higher, not lower, that way farmers can actually make a decent living, and be supported," she said.
Family Homestead Genuine Free Range Eggs are an accredited free-range egg producer.

And in last week's Weekly Times, Les White wrote this article:
WOOLWORTHS"STUNT' Egg growers crack it

WOOLWORTHS' move away from cage eggs is nothing more than a publicity stunt, according to the Australian Egg Corporation.
The AEC says cage egg sales will remain the same. despite Woolworths' reduction of cage suppliers.
The corporation has accused the supermarket of playing games with producers to increase its bargaining power.
But the AEC has also come under criticism, again being accused of representing the interests of cage producers over the free range sector.
One of the country's most respected free range farmers,Ivy Inwood, has even written to Agriculture Minister Tony Burke complaining about the situation.
In a circular to members, seen by The Weekly Times the AEC says it believes Woolworths' apparent move to halve its number of cage egg suppliers was to "consolidate their stock, reduce supplier numbers and therefore increase their price bargaining power".
The supermarket has rejected the claims. "This is about responding to consumer preferences,"a Woolworths spokesman said.
Free range farmers have attacked the AEC over an item in its newsletter which suggests egg farmers should tell media that "thousands of workers and their jobs could be threatened by any such move (away from cage eggs)."
"Some might conclude that if this were to occur, it would represent a gross abuse of market power by retailers and restaurant chains," the newsletter said.
Ivy Inwood, who produces both caged and free range eggs, has complained to Mr Burke that the AEC bats for cage producers at the expense of the free range industry.
She said a move to more free range would produce more employment because it was much more labour-intensive than fully-automated cage systems.
But AEC communications manager Jacqueline Baptista said moves away from cage eggs could see the eggs imported from overseas, resulting in lost Australian jobs.
She said the AEC "stands by all production methods", and denied the circular instructed members about what they should say to media.
Farm Pride, Family Homestead and Mrs Inwood rejected suggestions free range eggs could drop in price as demand increased.
"How can we drop the price unless we go automated, which means the birds don't go outside," Mrs Inwood said.
A spokesman for Mr Burke had not returned calls by The Weekly Times at the time of going to print.
Also see the post on this blog dated Sunday August 16

1 comment:

Jimmy said...

Clearly Woolworths is trying to push into free range to maximise their profits. Any claims to state that this is because of their consumer demands needs to be backed by independent consumer research which clearly states that majority of Woolworths consumers prefer free range. Again as the case has been tradionally, the supermarkets scrutinise the farmers to simply increase their profit margins.