Milking the Beer Wars
Friday, 25 March 2011
Australia's biggest brewer Foster's says it stopped its beer shipments to Coles and Woolworths because the two major retailers had resorted to selling the product at below cost.
Business Law & Taxation at the Australian School of Business
Michael Peters says "first it was milk, then eggs. Now beer is the latest product in the supermarket price war. But the beer supplier, Foster's, has fought back. The company withheld beer stocks from several retailers last month because they were intending to sell Foster's below cost and engage in what's known as loss-leading activity."
"It is very unusual for a company to pull a product, and obviously here Foster's is being very courageous to take on the supermarket giants. Loss-leading activity is simply where the product is sold at a loss for a period of time, and the suggestion is that Coles and Woolworths have done that or are intending to do that."
In a late night operation this month, Foster's made a call to stop the delivery of tens of thousands of cartons of VB, Carlton Draught and Pure Blonde to Coles' First Choice and Woolworths' Dan Murphy's chains. The decision was made in response to an advertising brochure with a massive price cut for brands such as VB, which were planned to be sold at $28 a carton. This brand has a wholesale price of around $33 and normally sells for about $38.
Michael Peters has practised as a commercial and corporate lawyer, and has analysed similar situations and says that the ACCC may now be looking very closely at how Fosters operates.