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Woolworths and Wesfarmers told to go easy on suppliers

The boss of one of Australia’s largest beverage companies, Lion, has taken issue with tactics used by supermarket chains Woolworths (ASX: WOW) and Coles, owned by Wesfarmers (ASX: WES). Lion’s business incorporates alcoholic beverage brands such as James Boag and dairy brands including Pura milk.

According to a report in the Sydney Morning Herald, Lion boss Mr Stuart Irvine has called upon the supermarkets to start sharing come of the cost savings from their efficiency drive with food and beverage manufacturers. Up until now the relationship between suppliers and the two giant retailers appears to have been going from bad to worse. Mr Irvine has suggested a “collaborative, constructive relationship” would be better.

Lion competes with a number of listed beverage and dairy suppliers including Treasury Wine Estates (ASX: TWE), Bega Cheese (ASX: BGA) and Coca-Cola Amatil (ASX: CCL), who all no doubt would concur with Mr Irvine’s comments.

Recent profit downgrades from Treasury Wine and Coca-Cola Amatil prove that beverage makers are finding both the domestic and international market tough. Even after recent share price falls however, investors still seem to have these companies priced for very strong rates of growth.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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