Coles chief defends moves to squeeze suppliers

Coles managing director, Ian McLeod, has defended the retail giant's efforts to pare down its prices at the expense of suppliers at a business lunch this week.

McLeod argued that some suppliers had higher profit margins than the supermarket chain did while selling Australian goods more cheaply overseas than they did locally, according to a report in the Sydney Morning Herald.

''What should we do?'' he reportedly asked. ''Challenge it, or turn a blind eye?''

McLeod has recently pointed out that a bottle of Coca-Cola sells for a third of the price in Asia than it does in Australia, and he told attendees of the American Chamber of Commerce this week that the key to Coles' turnaround over the past five years has been to hold prices down.

''Many of [our multinational suppliers] are bigger than Coles and make far larger profit margins. Prices are higher than overseas and that's why we challenge it. These examples include products made overseas and sold overseas at lower retail prices, much lower.

''It also includes examples of products made in Australia but still sold cheaper overseas,'' he said.

McLeod said Coles was increasingly working with its suppliers to boost locally-sourced products and had even supported some suppliers, such as milk processors, to help them upgrade their businesses.

''Politicians that attack Coles should remember that 18 million [Coles] customers support lower prices - and they vote,'' he said.

''Coles is in the business of keeping the cost of living down, so it is more than a little frustrating when some politicians criticise us for doing just that.''

The speech comes as the retailer continues its talks on a proposed food industry code of conduct with the Australian Food and Grocery Council, and the ACCC investigates claims that the supermarket giants used improper and unlawful practices to force down the prices paid to suppliers.

Coles also angered farmers this week with the release of shopping bags with the flying pig logo of activist group Animals Australia, which is linked to campaigns to end factory farming of pigs and poultry.

The National Farmers Federation wrote to the retailer, urging it to withdraw future support for Animals Australia, and beef and fat lamb producers called for a mass boycott of the retailer.

The Australian reports that Coles is expected to the pull the shopping bags from sale as a result, a move supported by Animals Australia.