Dick Smith has spoken out on the negative impact ALDI and Costco are having on Australian producers, saying blame shouldn’t be directed at Coles and Woolworths in his address to a Senate inquiry into the local food-processing sector.
In his 12-page submission to the inquiry, the entrepreneur said the arrival of the ALDI chain in the country has led to more food being imported from lower cost producing countries and greater pressure amongst the bigger supermarket chains to lower prices, “causing the gradual decline in the Australian food processing sector to the point where some sectors have disappeared completely.”
“We should stop blaming Coles and Woolworths for their size and market dominance… The situation has been caused by us and our political masters who don’t show the leadership that is necessary to tell us the downside of the extreme capitalism that we are now heading towards because of the limits of growth,” the entrepreneur said
In 2001, Smith said ALDI was welcomed into Australia by the Government on the basis it would be a strong competitor to Woolworths and Coles and result in lower prices for consumers. But, he now feels not enough thought was given to how the chain operated overseas and how its local expansion would impact employment and consumer “freedom of choice”
Smith said ALDI’s “low overheads” business model allows it to offer lower prices to consumers, but that it will have a dangerous longer-term effect on Australian jobs.
“ALDI’s lower prices primarily come from having lower labour costs, that is, they employ less Australians,” he said
“When Coles and Woolworths follow this particular trend, (as they will be forced to) where in a large supermarket you might only have one or two Australians employed our food prices may be slightly cheaper but in the long term our taxes will very likely go up to pay for the social services of people who no longer have jobs,” he added.
The owner of Dick Smith Foods said American-owned Costco is the one of the best examples of “extreme capitalism,” and blamed the chain for last year’s milk price wars, where Coles cut the price of milk to just $1 per litre.
“I think Coles and Woolworths are reacting to the situation where we have encouraged ALDI and Costco to come here… Coles have lost market share to Woolworths and have to get it back. It’s just capitalism working.”
Smith predicts ALDI and Costco’s business model will see “typical Australian owned retailers” like JB Hi-Fi, Dick Smith Electronics and Harvey Norman’s labour intensive business model forced to change.
“The sales people will lose their jobs – probably to become lower paid courier drivers (if they can get a job at all) delivering GST free imported goods from our airports, and all other sales will be at very low prices from warehouse style outlets,” he said.