Farmers: We want an Aussie produce aisle

Kathy Dudley, a cattle farmer and spring water producer in Tasmania, has called for the setup of Australian product-only aisles in supermarkets.

According to The Age, Ms Dudley says the move would get around the confusion caused by ‘weak’ labelling laws that allow food product labels to be misleading. Ms Dudley says the move would huge boost to sales of locally grown or made products, protect jobs and stimulate the economy.

Consumers buy supermarket products assuming they are Australian when the input from local manufacturers is minimal. Senator Nick Xenaphon says Ms Dudley’s concerns show the level of frustration over food labelling laws.

The issue is that supermarkets source some of their produce from overseas, but it may be packaged in Australia, or a small percentage of the product is sourced locally and combined with offshore ingredients, or ingredients from offshore may be used to manufacture a product locally, so it’s a difficult area to police to get labels to show the correct country of origin.

Businessman Dick Smith, who has championed local sourced and manufactured produce, says Ms Dudley’s idea is a good one, but suggested the multinational food companies and local supermarkets would oppose it. Mr Smith has also told The Age that politicians are not willing to take on the multinationals, and nothing would happen unless it was legislated.

A spokesperson for Coles – owned by Wesfarmers (ASX: WES) did not dismiss Ms Dudley’s idea, saying the supermarket retailer was open to new ideas. A Woolworths (ASX: WOW) spokesperson said research showed customers like to shop by food or product category in the supermarket.

Both supermarkets are looking to grow their private label product market share, because of the higher margins they can earn versus branded products. As Coca-Cola Amatil (ASX: CCL) boss Terry Davis has said, “If an Australian producer is not number one or two in their category, they may as well sell up.”

Companies as diverse as baker Goodman Fielder (ASX: GFF) and vitamin and supplements supplier Blackmores (ASX: BKL) have seen their margins suffer as they lose market share of their products sold in supermarkets.

Foolish takeaway

While the idea is noble, it’s unlikely to get off the ground. Supermarkets follow their own strategy and would only do it if it was in their best interests. Aussie farmers are also unlikely to get much support from the major political parties for such a move.

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Motley Fool writer/analyst Mike King owns shares in Woolworths.

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