Coles got supplier rebates for discounted promotions
Its ‘down down’ campaign enabled Coles to make higher profits as more product sold, depending on deals with suppliers, a senior executive says.
Coles’ “down down” promotion gave it more flexibility to allow retail price cuts for customers while supply costs rose, a court has been told.
Debra Galle, a senior general manager at the supermarket chain, also told the Federal Court in Melbourne on Wednesday that Coles received rebates from suppliers when their products were discounted and promoted.
Coles is fighting claims by the Australian Competition and Consumer Commission that it misled customers by artificially increasing prices before reducing them and claiming shoppers were getting a discount.
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By continuing you agree to our Terms and Privacy Policy.Coles has defended its “down down” discount campaign, saying grocery shoppers understood they represented “fair dinkum” price reductions.
Under questioning from the commission’s Garry Rich SC, Ms Galle said at the company “we consider ourselves a broad church” serving all Australians.
She said Coles received a rebate from product suppliers when Coles promoted a discounted product, with “down down” promotions involving a lower wholesale rate because of the lower retail price.
Depending on the deal with suppliers, Coles made a higher profit with a discounted price as more product was sold.
Suppliers returned an agreed amount to Coles for each unit of the product sold, in substance a rebate that reduced the wholesale price paid by the chain, Mr Rich told the court.
Ms Galle said “guard rails” were in place to ensure discount campaigns were not considered to be misleading advertising.
But the guard rails, that required a minimum time of six months for products to be at an established white-ticket price, made it difficult to discount prices, she said.
The “down down” campaign gave more flexibility with an adjusted minimum time of 12 weeks set for the white-ticket price, the court was told.
The more flexible discounting regime happened during a period when Coles was enduring many cost adjustments from suppliers, Ms Galle said.
“We needed more flexibility to be able to unlock discounts for customers,” she said.
On Tuesday Coles’ barrister John Sheahan KC told the court the public would accept the promotions as price drops, accusing the consumer watchdog of attributing “sophisticated thought processes” to customers.
“Down down” prices were genuine discounts offered to shoppers after an increase in wholesale costs charged by suppliers during a post-COVID inflation surge in 2022 and 2023, he said.
The competition watchdog is seeking significant penalties for alleged breaches relating to Woolworths’ “prices dropped” and Coles’ “down down” promotions across 15 months.
The case continues before Justice Michael O’Bryan.
