‘Jail’ threat for Woolies $8.4m boss

Woolworths CEO Brad Banducci has been threatened with jail time after refusing to answer questions about the supermarket chain’s profitability in a two hour-long standoff with furious senators.

Mr Banducci finally said he did not know what Woolworths’ return on equity was during the last financial year, after the inquiry suspended its hearings following a grilling from Greens senator Nick McKim.

“I think your evidence to the committee is that you don’t know what the return on equity is for the last financial year and you’d like to take the question on notice?” Senator McKim asked.

“Senator, yes I will take it on notice,” Mr Banducci replied.

Woolworths posted a total $1.7bn in profit in the last financial year.

Earlier, Senator McKim had asked Mr Banducci to explicitly clarify that he did not know the company’s equity return was and reminded him the Senate could jail someone found to be in contempt for up to six months.

“Senator, I don’t focus on it. It’ll probably be in a document somewhere but it’s not something I focus on,” Mr Banducci said.

Return on Equity (ROE) is a financial ratio used to evaluate the profitability and efficiency of a company.

Senator McKim said that Woolworths’ return on equity was around 26 per cent, which was around 2.5 times higher than Australian banks.

Earlier, the pair had clashed when Senator McKim accused the supermarket executive of “cherry picking” profitability data and misleading the public.

“I’m not interested in your spin,“ he said.

“Senator, with respect, we focus on return on investment,” Mr Banducci responded.

“Are you struggling with the ordinary English language?” Senator McKim snapped.

After Mr Banducci repeated that he focused on a return on investment not equity, Senator McKim erupted, telling the chief executive that Australians were “dumpster diving” and going for days without meals due to soaring grocery prices.

“We’re not interested in PR spin. We’re not interested in you bullsh**ing your way through this committee,” Senator McKim said.

The committee was later told that Mr Banducci earnt $8.4m in total remuneration last year.

Later, Coles CEO Leah Weckert, who saw some of the morning session, was able to provide Senator McKim with an answer of 31 per cent when he asked her about Coles’ return on equity.

UNFAIR TREATMENT OF SUPPLIERS ‘POSSIBLE’

Mr Banducci conceded it was “possible” that Woolworths had issues when dealing with its suppliers after farming groups and vegetable growers accused the company of using its market power to set unfair supply deals.

Liberal Senator Dean Smith asked Mr Banducci about “the level of transparency” Woolworths had when entering supply agreements with fruit and vegetable growers.

This came after industry groups alleged the two major chains were using non-binding supply deals to pay less for their produce.

One apple farmer from NSW told the inquiry during a hearing in March that he had not seen a price increase on his produce in over a decade, despite his costs rising by more than 50 per cent.

Mr Banducci said the company was “very sensitive” to the issue and was actively monitoring suppliers’ complaints.

“We want to provide a safe harbour for suppliers to raise issues,” he said.

Senator Smith added it was “disappointing” the company made no recommendations in its submission to the inquiry as to how arrangements with suppliers could be improved.

WOOLIES DENIES LAND BANKING

Mr Banducci has denied allegations of muscling out competition from independent grocers but wouldn’t confirm if he would provide a list of undeveloped sites owned by the company.

Past hearings have heard evidence of both Coles and Woolworths purchasing land as an investment and making no specific plans for its development, otherwise known as land banking.

“We do not do that (land banking) – we do buy land in growth corridors,” Mr Banducci told senators.

WHY ARE GROCERIES SO EXPENSIVE?

Earlier, Liberal Senator Maria Kovacic asked Mr Banducci why grocery prices in Australia were so expensive.

In the 12 months to August 2023, food prices across Australia rose 7.5 per cent, with households spending about $14bn on groceries in December last year.

Mr Banducci said inflation was largely responsible for soaring prices at the supermarket checkout.

“Grocery inflation is real and has been substantially driven by cost increases from our largest global consumer goods suppliers and the cyclical impacts in the domestic fresh food markets,” he said.

Senator Kovacic then asked Mr Banducci if he would support a mandatory food and grocery code.

It comes as the Australian government considers new rules to force grocery giants to follow a mandatory industry code of conduct when dealing with suppliers or face severe financial penalties.

“I’m a grocer, not a lawyer so I’ll give my grocer answer,” Mr Banducci replied.

He said Woolworths was supportive of a compulsory code but believed it should apply to all companies that sell “meaningful” amounts of groceries, such as Amazon, Bunnings and Chemist Warehouse.

COLES GRILLED OVER WHISTLEBLOWER TESTIMONY

Coles chief executive Leah Weckert has been confronted with testimony from a former product manager who claimed the business was shovelling the cost of price rises onto suppliers and customers.

Former Coles product manager Abdel Badoura, who fronted the inquiry during a hearing on Monday, presented emails sent by Coles representatives showing a sharp increase in margin expectations for the same grocery product over a short period of time.

He also claimed Coles actively sought to extract money from its suppliers during price increase negotiations, ultimately leading to price increases for customers at the checkout.

“Coles and Woolworths are running risk-free businesses, they are propped up by suppliers who are paying for the majority of their expenses, with the Australian public being overcharged at every step,” Mr Badoura said on Monday.

“They have gotten away with this for years due to the lack of competition in the market and their market power abuse.”

Senator McKim asked Ms Weckhert if Coles had “ever” increased its margin expectations for the same product category.

Ms Weckhert said she had “no idea” and took the question on notice.

“It’s not something that I would say has been a significant feature of how we think about our categories,” she said.

Ms Weckert also said she had concerns about the potential unintended consequences of a divestiture law.

“Our view would be there are a number of things that would be potential unintended consequences – higher prices for customers, potentially lower investment in the grocery sector in Australia, potentially poorer outcomes for regional areas and maybe job losses,” she said.

She also said Coles was not involved in land banking, saying 99 per cent of Coles stores were leased property.

Earlier, Ms Weckhert told the committee her base salary last financial year was $1.1m, after she received a pay rise when she stepped into the role in May.

CLASH WITH CRAIG EMERSON

Senator McKim later clashed with former Labor minister Craig Emerson over a previous contract with the Business Council of Australia.

Dr Emerson was tasked ith reviewing the voluntary grocery code of conduct, and released his interim findings earlier this month.

Coles and Woolworths are both members of the BCA and Senator McKim called out Dr Emerson for not declaring the link.

Dr Emerson said that contract was on industrial relations policy, not competition policy.

In his interim report for the government relased last month, Dr Emerson said divesiture laws – opposed by both supermarket giants – was a bad policy idea.

The Greens have produced a Bill to force divestiture.

WHAT’S HAPPENED?

The Senate inquiry into supermarket prices, chaired by Senator McKim, is due to present its final report by May 7.

Both supermarkets have faced criticism in recent years for raking in multi-billion dollar profits during the cost-of-living crisis, and their market dominance has been called into question as the government considers how to ease pressure on consumers.

Coles and Woolworths account for an estimated two-thirds of the market.

Earlier, Liberal senator Jane Hume said senators would pressure the pair over why they “feel the need to pass on higher prices to consumers”.

“There was some interesting testimony yesterday, and I suppose they’ll have to respond to some of the allegations that were made,” she told Sky News.

Former competition minister Craig Emerson, tasked with an independent review of the voluntary grocery code of conduct, handed down an interim report earlier this month which flagged making the code mandatory.

Dr Emerson – who is set to appear before senators on Tuesday afternoon – was critical of the idea of divestiture, which has been championed by the Greens and the Nationals, suggesting it would intensify market concentration.

Coles and Woolworths have also been vocal critics of divestiture laws.

In their submissions to the inquiry, both chains claim the supermarket landscape is already competitive, thanks in part to the entry of international retailers Aldi and Costco.

The hearing began at 8.30am.