Woolworths manager makes big claim over pricing deals

Products could be pulled from Woolworths stores unless suppliers were happy about any pricing deals, a court heard as part of a deceptive discount trial against the supermarket giant.

Australia’s consumer watchdog has accused Woolworths of breaching Australian Consumer Law by misleading consumers with deceptive discount claims on 266 products across their stores.

The ACCC alleges Woolworths, between September 2021 and May 2023 in the wake of the Covid-19 pandemic, falsely represented prices of various grocery items from Oreos biscuits to Friskies cat food and Nicorette patches.

It claims the supermarket giant temporarily increased prices up to 15 per cent on products that were sold at a stable price for at least six months.

The ACCC claims Woolworths shortly after placed the items on their Prices Dropped promotion, lowering the price and advertising the product as a savings deal; however, the new reduced price remained the same or higher than the original price before the short-term increase.

Woolworths denies the accusation.

The legal battle is playing out in Federal Court this week before Justice Michael O’Bryan, who also presided over a near identical case against Coles, heard earlier this year.

In court on Thursday, former Woolworths Everyday Value head of pricing and current merchandise manager for vegetables Sam Woodcock told the court that certain price increase decisions were made with the Prices Dropped program in mind.

Regarding negotiations forCarman’sfruit and nut muesli bar 12 pack, it was proposed an initial recommended retail price increase from $10 to $11 would occur, with the intention the product would re-enter the Prices Dropped program at some lower price.

Mr Woodcock said he agreed to Carman’s cost price increase at the time without accepting its promotional proposal as a “negotiating tactic” and to ensure the product remained on the shelves.

In internal communication referenced to by Mr Woodcock’s affidavit, he said he would accept the cost increase and “wait for the penny to drop” regardingCarman’sneed to include themselves on the Prices Dropped program to remain competitive.

“The proposal was for the product to go on Prices Dropped and I presume it would have gone on to Prices Dropped at that point in time,” he said.

Mr Woodcock said there were certain time pressures for managers to reach a satisfactory deal with suppliers in negotiating cost hikes, especially in a post-Covid environment.

“Essentially, if a supplier proposes a cost price increase to be effective from a certain date and we don’t accept that as a retailer, there’s a risk that if we haven’t accepted and actioned it in our system that a supplier will choose not to supply us that product anymore,” he said.

“At that time, ensuring that we had product on the shelf was an absolute requirement.”

Woolworths chief commercial officer Paul Harker told the court on Thursday the supermarket giant became aware of ACCC inquiries in mid-2022.

Woolworths baby needs category manager Stuart Robinson gave evidence around a 2023 deal with Nestle over a Cerelac baby food product.

Mr Robinson said negotiations between the parties only calculated profitability based on the assumption the product would be placed on the Prices Dropped program.

In an email to a superior, Mr Robinson laid out a future ‘was’ price of $6.50, higher than the existing shelf price, which he identified would reduce to $6 soon after, when the product became available on the Prices Dropped program.

He conceded the ‘was’ price discussed in the email was not a price that had been charged by Woolworths up to that date.

Mr Robinson clarified other conversation around alternative pricing structures could have occurred if Nestle did not wish to continue on the Prices Dropped program.

“I don’t know whether it was an actual review or if we just had an initial enquiry from them (at the time),” Mr Harker said.

In a September 2022 training document seen by the court and presented by Mr Harker, team members were told to keep quiet about an “ACCC review”, as it was “confidential”.

Mr Harker said, about this time, a review of the organisation’s pricing policies took place.

“As you do when people ask questions, it causes you to stop and think and look and review,” he said.

The court was told an updated pricing rules document was presented in September 2022.

“The purpose of the rules is to … (ensure the team know) what they should or should not be doing when they are managing pricing programs in Woolworths,” Mr Harker said.

ACCC barrister Michael Hodges KC suggested Woolworths interpreted the “was” price – the standard, higher shelf price before an item is discounted – was different between its yellow ticket Special items and its Prices Dropped items.

“I don’t think so,” Mr Harker replied, although he did not offer an explanation for how each “was” price was established, nor why it differed between the two pricing programs.