WEBVTT - The beloved Australian treats getting jammed

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<v Speaker 1>From the Australian. Here's what's on the front. I'm Claire Harvey.

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<v Speaker 1>It's Monday, April twenty twenty twenty six. Small business owners,

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<v Speaker 1>tradees and farmers are asking the Treasurer for a huge

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<v Speaker 1>cut to red tape and compliance costs in the May budget.

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<v Speaker 1>They say even a cafe owner needs dozens of licenses

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<v Speaker 1>and certificates before they can make a single flat white.

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<v Speaker 1>Ben Robert Smith's lawyers are considering an application to permanently

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<v Speaker 1>stay his prosecution for five alleged war crime murders, with

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<v Speaker 1>the argument to be the former Special Forces soldier can't

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<v Speaker 1>get a fair trial because of all the media attention

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<v Speaker 1>in his case. Those stories are live now at the

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<v Speaker 1>Australian dot com dot au. As the Iran War sends

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<v Speaker 1>costs soaring, Woolies is telling its suppliers farmers and food

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<v Speaker 1>producers they can't lift shelf prices. Cole's is temporarily paying

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<v Speaker 1>struggling dairy farmers. More, both supermarket giants are fighting off

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<v Speaker 1>legal action by the regulator over allegedly fake discounting, with

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<v Speaker 1>Woolly's case to hit the Federal court this week. So

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<v Speaker 1>who gets jammed? Our story starts with a much loved

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<v Speaker 1>Australian company, feeling the.

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<v Speaker 2>Pain and like every good yard, it's true. It's Bunderberg's

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<v Speaker 2>Queens Lamps Australias, the world's great Australian brew.

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<v Speaker 1>Eli Greenblatt is a senior business reporter with The Australian ELI.

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<v Speaker 1>You had a story which really got our audience paying attention.

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<v Speaker 1>It was about one of Australia's most beloved drinks makers, Bunderberg,

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<v Speaker 1>which produces gingerbeer.

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<v Speaker 3>That kind of thing, well, bunderboog gingabear gets its name

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<v Speaker 3>because it's from Bunderberg, contains fresh ginger and is traditionally brude,

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<v Speaker 3>just like regular beer. But if we made it any

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<v Speaker 3>other way, it just wouldn't be Bunderberg ginger beer.

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<v Speaker 1>But I love Bunderberg ginger beer, I must admit, and

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<v Speaker 1>so to my kids. But their innoviti of strife, Why.

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<v Speaker 4>Yes, we love Bunderberg ginger beer too, so much as

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<v Speaker 4>the country and increasingly overseas. And the problem for them

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<v Speaker 4>is their expenses are just out of control, flowing from

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<v Speaker 4>the war in Middle East, the war with Iran. They

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<v Speaker 4>rely heavily on fuel, on diesel. You can imagine that

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<v Speaker 4>their factory that they're brewing site is up in Bunderberg

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<v Speaker 4>in regional Queensland. They need to get their gingerbeer all

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<v Speaker 4>over the country, so as far as Western Australia and overseas,

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<v Speaker 4>diesel touches every part of their business. Their expenses. Their

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<v Speaker 4>diesel expense alone has gone up almost forty percent and

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<v Speaker 4>they need to claw back some of those costs. Now.

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<v Speaker 4>The only way they can claw it back is by

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<v Speaker 4>charging the supermarkets more, the main sellers of their ginger beer.

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<v Speaker 4>And then you would think the supermarkets could pass on

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<v Speaker 4>those costs to customers. But in this environment, in a

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<v Speaker 4>highly inflationary environment, with the cost of living crisis, it's

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<v Speaker 4>very hard, or the supermarkets believe anyway, it's very hard

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<v Speaker 4>to pass on those costs. So for a producer like

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<v Speaker 4>Bunderberg and many other producers, many other food and grocery suppliers,

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<v Speaker 4>they're facing exploding costs because of the war in Iran.

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<v Speaker 4>They need to call those costs back, but the people

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<v Speaker 4>they sell to are quite reluctant. They're pushing back and

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<v Speaker 4>that's a big problem for them.

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<v Speaker 1>It's interesting though, in this conversation il I always think

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<v Speaker 1>where we talk about the supplies being squeezed and their

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<v Speaker 1>relationship with the retailers who are very powerful. And then

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<v Speaker 1>we talk about the retailers potentially being reluctant to pass

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<v Speaker 1>price rises onto the customer because they're worried about, of course,

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<v Speaker 1>about market share. But both the major supermarkets in Australia,

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<v Speaker 1>Coles and Wilworths, make more than a billion dollars profit

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<v Speaker 1>per annum. Why can they not just absorb more of

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<v Speaker 1>these price rises in the interests of maintaining their market share?

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<v Speaker 4>You know, the supermarkets are seen as very strong. And

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<v Speaker 4>let's talk about Coals and Woolworths. Yes, they're profitable. I

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<v Speaker 4>wouldn't say they're highly profitable. They're not as profitable perhaps

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<v Speaker 4>as iron all miners or gold mines at the moment,

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<v Speaker 4>or some tech companies. Their profit actually is quite conservative,

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<v Speaker 4>it's quite reasonable in the scheme of things compared to

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<v Speaker 4>other companies. And yes, they make billions, but they also

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<v Speaker 4>have tens of billions in sales, and then billions of

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<v Speaker 4>dollars in costs for themselves, hundreds of thousands of staff,

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<v Speaker 4>it distribution, warehousing, They need to open stores, they need

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<v Speaker 4>to refurbish stores, so their profit margin, what's left at

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<v Speaker 4>the end of the day is maybe a few cents

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<v Speaker 4>in the dollar. Now, the problem for Coals and Woolworths,

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<v Speaker 4>and I'm not saying we should feel sorry for them,

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<v Speaker 4>but certainly their problem, their conundrum is they're kind of

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<v Speaker 4>stuck in the middle where they have to balance their

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<v Speaker 4>duty to their own staff, so to pay them properly,

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<v Speaker 4>they have to pay their suppliers so their suppliers can

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<v Speaker 4>stay in business. They have to have a return for

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<v Speaker 4>their shareholders, so their shareholders continue to invest in them.

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<v Speaker 4>They have to invest money back into the business, so

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<v Speaker 4>new distribution centers, new transport, new supply chains, refurbishments. They

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<v Speaker 4>also have to sell the product at a reasonable price

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<v Speaker 4>for customers, so they keep on coming back. So then

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<v Speaker 4>the problem comes. For example, let's say in one instance

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<v Speaker 4>they and will use Bunderberg ginger beer as an example.

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<v Speaker 4>Let's say they pass on those higher costs incurred by

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<v Speaker 4>gingerbeer to their shoppers. Well, the shoppers will stop buying

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<v Speaker 4>although by lets. So that means if the sales are down,

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<v Speaker 4>their profits are down, so their return to their shareholders falls.

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<v Speaker 4>They have less money to reinvest in their staff for

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<v Speaker 4>the training of their staff. They have less money to

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<v Speaker 4>invest in refurbishments, they have less money to pay for wages.

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<v Speaker 4>So that causes kind of a cascading problem all the

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<v Speaker 4>way down the line. Now, let's say you take the

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<v Speaker 4>other example. They don't pass on those costs and they

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<v Speaker 4>say to Bunderberg or they say to Coca Cola or

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<v Speaker 4>Cadbury or whoever, Look, we can't pass on those costs.

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<v Speaker 4>You've got to cover it yourself. Well, the supply gets

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<v Speaker 4>in trouble, do they survive? Where do they get their

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<v Speaker 4>products from? So it's about striking that balance between suppliers, customers, shareholders.

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<v Speaker 4>But certainly, and then we've written about this, certainly for

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<v Speaker 4>Woolworths and for Calls, they believe there's a little appetite

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<v Speaker 4>in this current environment to raise prices for shoppers. They

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<v Speaker 4>just won't accept that.

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<v Speaker 1>Here's what Woolly's CEO, Amanda Bardwell had to say about

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<v Speaker 1>that at The Australian's Global Food for in March.

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<v Speaker 5>I'm very concerned for customers. They're already under immense cost

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<v Speaker 5>of living pressure and so to see the incroasis that

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<v Speaker 5>we have from a fuel perspective, it does just add

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<v Speaker 5>another layer of pressure on customers. And so for us,

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<v Speaker 5>that's where we're very focused right now. Is value unbelievably important,

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<v Speaker 5>and that's critical for us to really focus on what

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<v Speaker 5>is it that we can do right now to make

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<v Speaker 5>a difference.

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<v Speaker 1>From the suppliers point of view, that is crushing news.

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<v Speaker 1>And they often have a real love hate relationship with

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<v Speaker 1>these supermarkets. You know, dairy producers for example, are at

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<v Speaker 1>the mercy of price stting by these retail giants because

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<v Speaker 1>of course they rely on them. Where does your sympathy

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<v Speaker 1>lie here, though, Eli? You know, do you understand how

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<v Speaker 1>it is incredibly confronting for a company like Bunderberg, which

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<v Speaker 1>employs about two hundred and eighty people, to be in

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<v Speaker 1>this situation.

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<v Speaker 4>Yeah, I've been bundergoing a great regular company, and we

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<v Speaker 4>need more of those regial companies in rule and regual

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<v Speaker 4>areas employing people in good, well paying jobs. I think

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<v Speaker 4>it's tough, and I don't have a dog in this fight,

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<v Speaker 4>but my sympathy is actually with everyone because the supplier

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<v Speaker 4>needs to make money, The supplier needs to stay in business.

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<v Speaker 4>The supply needs to make a return on their own investment,

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<v Speaker 4>whether it's Bunderberg or a giant like Coca Cola. To

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<v Speaker 4>keep on investing a company like Coca Cola or Cadbury's

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<v Speaker 4>or any of those big brands that you see in

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<v Speaker 4>the supermarket. They won't invest in Australia unless they can

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<v Speaker 4>make a return, a decent return, and that means thousands

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<v Speaker 4>of their own jobs. It means investment in regional factories.

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<v Speaker 4>The money's not there, they'll close down. That's a problem

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<v Speaker 4>for Coals and Woolworths. If they can't make money, they

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<v Speaker 4>will open less stores, they employ less staff. Of the

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<v Speaker 4>staff they do have, they'll pay them less money. They

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<v Speaker 4>also have sympathy with the shopper. They need to be

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<v Speaker 4>able to afford the groceries in the first place. And

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<v Speaker 4>in this environl there is little appetite to raise prices.

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<v Speaker 4>It's very tough out there. There is a cost of

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<v Speaker 4>living crisis. Inflation is already out of control. It's ticking

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<v Speaker 4>up to four percent. Many economists believe it will get

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<v Speaker 4>to five or six percent even as this crisis in

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<v Speaker 4>the Middle East plays out. Someone has to pay more now.

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<v Speaker 4>Maybe it's spread evenly. Maybe it's like, you know, a

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<v Speaker 4>quarter with the supplier, a quarter with the supermarket, some

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<v Speaker 4>with the customer, some with the shareholder. Someone has got

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<v Speaker 4>to bite the bullet is someone has to take that cost.

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<v Speaker 4>It's now a big tug of war between those three

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<v Speaker 4>or four parties, and it's not clear yet where it's

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<v Speaker 4>going to go.

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<v Speaker 1>Coming up. Is there a way to make the whole

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<v Speaker 1>system fairer?

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<v Speaker 4>Is there Do you.

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<v Speaker 1>Think an opportunity for there to be at a two

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<v Speaker 1>speed system here where Coals and Wilworths kind of use

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<v Speaker 1>their power and maybe consider it their obligation to help

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<v Speaker 1>protect small supplies who would go under without them, and

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<v Speaker 1>maybe inflict a little bit more pain on the Coca

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<v Speaker 1>Colas of the world, who, let's be honest, are going

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<v Speaker 1>to survive no matter what.

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<v Speaker 4>Yeah, and you think they would survive no matter what.

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<v Speaker 4>And Wallies and coals the supermarkets, they are sympathetic to

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<v Speaker 4>the suppliers and the problems of these supplies, especially smaller

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<v Speaker 4>ones who do rely so much on the great volumes

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<v Speaker 4>they can get with coals of woolies. You mentioned this

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<v Speaker 4>love hate relationship. That's absolutely true. If you're a small

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<v Speaker 4>supplier like Underberg or anyone else, if you can get

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<v Speaker 4>a deal with coals and Woolies, that's huge volumes you

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<v Speaker 4>can have through your factory that really sustains you and

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<v Speaker 4>keeps you going. But I think, for example, you mentioned

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<v Speaker 4>Coca Cola, Coke, or Mars, Wrigley or Cadbury's. We think

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<v Speaker 4>of these large suppliers as faceless conglomerates who make so

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<v Speaker 4>much money it doesn't really matter to them. But in

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<v Speaker 4>a way it does. And when we've interviewed with the Australian,

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<v Speaker 4>the local bosses of Mars or Cadbury or Coca Cola,

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<v Speaker 4>they have to go back to their head offices which

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<v Speaker 4>are overseas, perhaps in Switzerland or the United States, and

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<v Speaker 4>they have to justify to them why they keep on

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<v Speaker 4>investing in Australia. They have to justify the return to

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<v Speaker 4>the head office. And if Coca Cola in Atlanta, or

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<v Speaker 4>Nesley in Switzerland, or Mars, which is in Chicago, if

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<v Speaker 4>they can't see a return of investing in Australia, they

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<v Speaker 4>won't invest. They can move the factory to Indonesia or

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<v Speaker 4>the Philippines or China and then quite easily import that

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<v Speaker 4>product to Australia. And that means we lose out on jobs.

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<v Speaker 4>Many of them are regional jobs. Cadbre Mars have got

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<v Speaker 4>regional factories. We lose out on technology. We lose out

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<v Speaker 4>on an investment, and they can do that very easily.

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<v Speaker 4>If you're an executive in Mesley in Switzerland or in

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<v Speaker 4>Mars in Chicago, you don't really care too much about

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<v Speaker 4>perhaps jobs being lost in Australia. It's not going to

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<v Speaker 4>be of concern to you. But those are real choices

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<v Speaker 4>being made right now, and those conglomerates have to justify

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<v Speaker 4>a return in Australia, as does Bunderberg or a small

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<v Speaker 4>muslea company or a small sweets or chocolate company in Melbourne.

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<v Speaker 1>It's interesting, isn't I think One of the reasons why

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<v Speaker 1>the Bunderberg story appeal to our audience so much is

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<v Speaker 1>that this is one of the little affordable luxuries that

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<v Speaker 1>makes life worth living, especially in a time of high

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<v Speaker 1>cost of living. You know, you might not be able

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<v Speaker 1>to afford anymore to take the whole family out to breakfast,

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<v Speaker 1>which is now one hundred dollars proposition, but you can

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<v Speaker 1>buy a six pack of Bunderberg ginger beas and drink

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<v Speaker 1>them on a Thursday night or something at home. It's

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<v Speaker 1>really sad that it's those small suppliers who are feeling

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<v Speaker 1>the pain kind of hardest and first isn't it.

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<v Speaker 4>I think it is, and it's anigh conic that is overused,

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<v Speaker 4>but it is an iconic Australian brand which should get

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<v Speaker 4>our support absolutely, and people do love Underberg gingerbeer. I do,

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<v Speaker 4>and people just have that emotive feel about it.

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<v Speaker 2>It's a story that started with mom, dad, my wife

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<v Speaker 2>and I now up to its fourth generation of a

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<v Speaker 2>true blue brew that captured the hearts and the taste

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<v Speaker 2>buds of the nation.

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<v Speaker 4>But I think if they went to the supermarket and

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<v Speaker 4>saw that six pack or slab of ginger beer had

0:13:32.960 --> 0:13:35.880
<v Speaker 4>gone up by five or ten percent, you watch the

0:13:35.880 --> 0:13:41.000
<v Speaker 4>sales drop. They will just absolutely shrink. And from our discussions,

0:13:41.040 --> 0:13:45.080
<v Speaker 4>our interviews with Bunderberg, you know they're possibly asking for

0:13:46.000 --> 0:13:52.240
<v Speaker 4>maybe five six percent increase price increase from Mullies or Calls. Now,

0:13:52.600 --> 0:13:55.440
<v Speaker 4>if that is translated to a five or six percent

0:13:55.559 --> 0:13:59.320
<v Speaker 4>increase at the shelf price, you com bet sales will plummet.

0:14:00.160 --> 0:14:04.640
<v Speaker 4>It's a big problem that's today's fresh food people.

0:14:05.320 --> 0:14:07.760
<v Speaker 1>Price is of course the thing that Calls and Woolies

0:14:07.760 --> 0:14:12.800
<v Speaker 1>are experts in. Then that's how they've got themselves into

0:14:12.880 --> 0:14:16.160
<v Speaker 1>trouble with the Australian competition and consumer Commission. The a

0:14:16.280 --> 0:14:19.240
<v Speaker 1>Triple C is taking will worse than Coals to court

0:14:19.680 --> 0:14:23.600
<v Speaker 1>for alleged misleading claims in their ads. There's always something

0:14:23.640 --> 0:14:26.760
<v Speaker 1>that's causing supplies to feel the heat. In this instance,

0:14:26.800 --> 0:14:30.880
<v Speaker 1>there's this extra pressure from the regulator. Is that what

0:14:31.040 --> 0:14:34.560
<v Speaker 1>is making Woolies, for example, pushback so hard on supplies

0:14:34.680 --> 0:14:35.080
<v Speaker 1>right now?

0:14:36.520 --> 0:14:38.800
<v Speaker 4>I think yes, the regulator is taking a very close

0:14:38.840 --> 0:14:43.160
<v Speaker 4>eye as our politicians on the way supermarkets treat supplies.

0:14:43.200 --> 0:14:45.240
<v Speaker 4>And we saw that play through a Senate inquiry and

0:14:45.280 --> 0:14:49.600
<v Speaker 4>a couple see inquiry which the supermarkets have to deal

0:14:49.760 --> 0:14:52.200
<v Speaker 4>in good faith with supplies and sit down with them

0:14:52.240 --> 0:14:55.080
<v Speaker 4>and listen to what's going on, and they need to

0:14:55.120 --> 0:14:58.240
<v Speaker 4>respond within about thirty days of a price high request.

0:14:58.720 --> 0:15:00.800
<v Speaker 4>So we're going to start to see that now hit

0:15:00.880 --> 0:15:03.840
<v Speaker 4>Coals and Mollies and they have to really consider what

0:15:04.000 --> 0:15:06.840
<v Speaker 4>they do. But it's certainly a big problem where you've

0:15:06.880 --> 0:15:11.520
<v Speaker 4>got diesel fuel prices going up forty percent. Someone's going

0:15:11.600 --> 0:15:14.000
<v Speaker 4>to pay for that? Who pays for it? Now? Do

0:15:14.080 --> 0:15:16.920
<v Speaker 4>the politicians want that to end up in shelf prices,

0:15:17.160 --> 0:15:20.200
<v Speaker 4>which then ends up in inflation and puts more pressure

0:15:20.640 --> 0:15:23.760
<v Speaker 4>on the Reserve Bank to increase interest rates. Would they

0:15:23.840 --> 0:15:27.360
<v Speaker 4>rather see Coals and Moullies take a hit to their profit? Well,

0:15:27.400 --> 0:15:29.480
<v Speaker 4>I don't know if Shells will be happy. And by

0:15:29.520 --> 0:15:32.720
<v Speaker 4>the way, most Australians have shares in Coals and Mollies

0:15:32.720 --> 0:15:35.400
<v Speaker 4>to their super funds. So would you want a lower

0:15:35.440 --> 0:15:38.240
<v Speaker 4>return on your investment? I mean, who wears the pain here?

0:15:38.480 --> 0:15:40.120
<v Speaker 4>It's not very clear at the moment.

0:15:40.240 --> 0:15:43.880
<v Speaker 1>Yeah, it's a diabolical situation. And these are basically logistics companies,

0:15:43.920 --> 0:15:46.440
<v Speaker 1>aren't they for supermarkets? I mean their food retailers of course,

0:15:46.440 --> 0:15:49.120
<v Speaker 1>and they're experts in marketing, but most of their time

0:15:49.200 --> 0:15:51.520
<v Speaker 1>must be spent working out kind of logistics like these.

0:15:52.840 --> 0:15:55.680
<v Speaker 4>So much is that case of imagine a supermarket in

0:15:55.680 --> 0:15:59.920
<v Speaker 4>this particular to the supermarkets. Imagine getting fresh food, dairy

0:16:00.080 --> 0:16:03.520
<v Speaker 4>food that is perishable all over the country at the

0:16:03.560 --> 0:16:06.560
<v Speaker 4>lowest price possible, in the fastest possible way, so it

0:16:06.560 --> 0:16:09.640
<v Speaker 4>doesn't go off on the shelf at the same price

0:16:09.720 --> 0:16:13.040
<v Speaker 4>that you charge anywhere in the country. It's a huge,

0:16:13.240 --> 0:16:19.120
<v Speaker 4>complex logistical nightmare. And not surprisingly, Coals and Woolworths invest

0:16:19.360 --> 0:16:24.280
<v Speaker 4>billions of dollars billions on their logistics, on their supply chains,

0:16:24.280 --> 0:16:27.320
<v Speaker 4>on their warehouses, and they do that with the hope

0:16:27.320 --> 0:16:30.840
<v Speaker 4>of getting a return. So, you know, Coals, for example,

0:16:31.080 --> 0:16:33.760
<v Speaker 4>in the last few years has spent two or three

0:16:33.880 --> 0:16:39.040
<v Speaker 4>billion dollars on state of the art warehouses, using robots,

0:16:39.160 --> 0:16:43.960
<v Speaker 4>using automation to really increase their efficiency and their speed

0:16:44.480 --> 0:16:48.600
<v Speaker 4>from the farm gate to the shelf. But to do that,

0:16:48.680 --> 0:16:50.720
<v Speaker 4>they need a return. They need to make a profit

0:16:51.120 --> 0:16:54.360
<v Speaker 4>to justify that, you know, I Agreen, thank you very much,

0:16:54.440 --> 0:16:54.720
<v Speaker 4>thank you.

0:17:02.280 --> 0:17:05.720
<v Speaker 1>Eli Greenblatt is a senior business reporter with The Australian.

0:17:06.080 --> 0:17:08.360
<v Speaker 1>You can read all the latest in business, as well

0:17:08.359 --> 0:17:12.080
<v Speaker 1>as Australia's best news, sport and politics right now at

0:17:12.160 --> 0:17:14.119
<v Speaker 1>the Australian dot com dot au