Woolworths and Coles ranked worst supermarkets for suppliers in major report

Grocery suppliers have ranked Woolworths and Coles as the worst major supermarkets to deal with in a new report that found ongoing and widespread frustrations about feeling pressured to give up their own margins during tough negotiations or risk having their products pulled from shelves.

Aldi was consistently named as the fairest and most respectful supermarket for suppliers to deal with, followed by IGA operator Metcash, in the first survey to take place under the federal government’s beefed-up code of conduct for the sector. Coles and Woolworths, ranked third and fourth respectively, showed improvements in their scores – but still exercise disproportionate control over where the product ends up, or stays, on the shelf.

Nearly half of all survey respondents, which collected about 950 responses, described price negotiations as challenging and said retailers “always or mostly” ask for further discounts during “range reviews”.

“These negotiations are often difficult, opaque and shaped by retailer margin demands,” said Food and Grocery Code supervisor Professor Elizabeth Sarofim.

“The report highlights the risk that supermarkets may use their buying power to force suppliers to carry inflationary pressures, rather than allowing suppliers to recover genuine increases in input costs.”

The annual report is the first under the revamped Food and Grocery code of conduct that kicked in on April 1, 2025 to directly address the power imbalance between major supermarkets and suppliers, including fear of retribution for speaking out.

”The concept [of retribution] appears to be difficult for suppliers to isolate from the unequal bargaining power which is a consistent and pervasive commercial aspect of their day-to-day dealings and underpinned the introduction of a mandatory code,” said Sarofim.

Her report comes months after Federal Court lawsuits from the Australian Competition and Consumer Commission lifted the lid on the extensive negotiations the major supermarkets undertake with their suppliers, including negotiating ‘discounts’ alongside price rises.

The major supermarkets are competing more fiercely on price as customers increasingly spread their grocery shop across different retailers following a period of rapid inflation and interest rate increases.

But some suppliers reported that the lower prices have come at their expense as supermarkets request greater discounts from suppliers – or “above average” margin contributions – which puts pressure on their own commercial viability.

“As suppliers we are expected to give them more margin when we cannot increase our prices and yet they want us to drop our prices to them to give them an increased profit margin,” said one anonymous respondent. If suppliers don’t comply, the respondent said, they risk having their items removed from supermarket shelves.

“We are terrified of the outcome,” they said, because it could mean losing a large part of their business and hurt their staff. “Over many years they have continued to increase their profits by putting up prices without us putting up our prices.”

In a statement, Coles disputed the report’s conclusions, pointing to improvements in perceptions of fairness.

“We are disappointed that aspects of the report appear to rely on selective anecdotal commentary and broad conclusions that are not supported by the report’s own evidence,” said a Coles spokesperson.

“We will continue to engage constructively with suppliers, the Code Supervisor and government to support a Code that delivers practical and positive outcomes for suppliers, customers and the broader grocery sector.”

Woolworths has been contacted for comment.

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