During the recent Coles supermarket vs Campbell Arnott’s marketing dispute around the product Tim Tams, Coles managing director John Durkan said there was no justification for Campbell Arnott’s to lift the pricing of some of their biscuit line by 10 per cent.
In the free market of Friedman economics, a company has every right to set the price for their product. It is up to the consumer decide whether or not they will buy that product at that price and competitive markets sort it out without interference. In theory that is how a free competitive market should work. It’s an interesting comparison then considering Mr Durkan’s reservations of the product supply sector’s right to increase prices.
Let’s look at the numbers across some sectors and the increases in prices and income since around 1992.
0% – No increase in milk prices from the regulated price of 1992 in Brisbane to the price of supermarket brands today.
+20% – Farmgate price of milk for dairy farmers in Southern Queensland going into bottles – this has increased by 20% or about 10cents per litre since 1992.
+79% – Consumer Price Index (CPI) increase since 1992.
+80-90% – Increase in Murray Goulburn average export milk price in southern Australia. Contrary to claims made by Coles executives that all milk price movements are directly linked to the export price, Murray Goulburn has seen an average increase of about 3.5% pa compared with 0.7% in Qld with domestic and export prices more often moving in opposite directions.
+153% – Increase in the average full time wage in Australia from $30,432 to $76,960 since 1992.
+188% – Increase in pay of Members of House of Representatives and Senators.
+700%? – ASX 100 CEO’s salaries – this is an estimated increase in executive packages in Australia.
It is clear the consumer is not the main beneficiary of this market domination. Particularly when you consider long term contracts to a selected group of dairy co-ops that supply the supermarket branded milk.
Where does the long term milk pricing go with the 10-year contracts that are currently locking $1 milk in place? I doubt that even the most passionate supplier shareholders of the large southern co-op will be happy for their milk to be sold, as the contract wears on, for 80 cents or less per litre in 2014 value?
