Pressure is growing on grocery prices after Woolworths ramped up its fuel levy for major food and grocery suppliers using its truck fleet to transport goods from the factory gate to the supermarket store, with other transport carriers such as Australia Post also hitting businesses with fuel surcharges to cope with rampant fuel prices flowing from the Iran war.
The spectre of higher petrol and diesel costs now as the Australian economy in its grips, heaping extra costs on supermarkets, trucking companies and delivery companies which likely will fall into the lap of shoppers as they face higher prices at the supermarket shelf when visiting Woolworths, Coles, Aldi or independents.
Woolworths has now upped the fuel levy charged by its truck drivers to food and grocery suppliers to nearly three times the level recorded when the Iran war began in February, stoking fears households could face a new round of supermarket inflation.
Both metro and regional fuel levy charges have now almost tripled since the Iran war began and are at near record highs through the protracted Middle East conflict.
The extra fuel levy costs will be borne by some of the country’s largest food and grocery manufacturers. Primary Connect +, the service which handles end-to-end logistics for as many as 1300 companies across Australia, has handled fast moving consumer goods for some of the supermarket sector’s largest suppliers such as Arnott’s, Diageo, PepsiCo, Sanitarium, Ingham’s, Campbell’s, Kimberly-Clark as well as Endeavour Group’s liquor stores Dan Murphy’s and BWS.
On Monday customers of Primary Connect, the Woolworths logistics fleet which trucks goods to enormous Woolworths distribution centres and then to stores, were told the fuel levy for metro areas would rise to 19.88 per cent, up from 17.47 per cent previously.
The Woolworths fuel levy charged to drivers – and then likely passed on to suppliers – was as low as 7.28 per cent before the US began its war against Iran that led to the closure of the Strait of Hormuz and a surging global price for fuel. But within weeks of the conflict the fuel levy went to 12.47 per cent.
It comes as consumers face a daunting inflationary challenge with surging inflation showing no signs of slowing and prompting the Reserve Bank of Australia to last month lift official interest rates by 25 basis points to 4.6 per cent and another rate rise before Christmas now on the cards.
The nation’s inflation rate hit 4 per cent in August, driven by higher fuel and housing prices. Shoppers are feeling the pressures at the petrol station as they fill up their cars and now businesses too forced to pass on rising fuel costs to safeguard their own finances.
That pressure is being felt especially in the $145bn supermarket sector where Woolworths and Coles are tackling skyrocketing fuel prices as they direct food and groceries from the farm gate or factory gate to their stores.
The levy on rural and regional transport contracts has also risen sharply, and on Monday was upped to 50.3 per cent from 44.2 per cent previously.
When the Iran war began earlier this year the regional fuel levy charged by Primary Connect jumped to 31.56 per cent from 18.44 per cent – taking the increase since March to more than 172 per cent.
“We operate a large distribution network that includes independently owned and operated transport providers, and we are committed to supporting our transport partners, just as other industry players are doing,” a Woolworths spokesman told The Australian on Tuesday.
“To ensure they can keep their trucks on the road and get products on shelves in stores, we increased our review of the fuel levy to twice monthly in March to reflect the challenges they still face.”
A spokesman for Coles said the retailer is continuing to support its transport providers by regularly reviewing the fuel component of its freight rates so that changing fuel costs are reflected quickly and fairly.
“We are working closely with our transport providers as things change to help ensure we continue to get supply to Australians right across the country.”
A recent note from JP Morgan warned that rising inflation is again flowing through supermarket shelves, with Woolworths and Coles entering “a new phase of higher inflation and potential supply challenges” as pressure builds across the food supply chain.
Mirroring the supermarket sector, other transport companies have also increased fuel charges and levies on transport contracts that truck everyday items across the country, while carriers such as Australia Post, Team Global Express and FedEx have also hiked fuel charges to customers.
Australia Post has almost doubled its fuel charge since September to 11.5 per cent and will lift it to 13.5 per cent in November. As the Iran war looked to recede in the middle of the year and the federal Labor government reduced the fuel excise, Australia Post was able to lower the fuel charge to as low as 4.8 per cent.
Now with fuel prices again on the rise, and no end in sight to the Iran war or full opening of the Strait of Hormuz, Australia Post is lifting its fuel charges for contract parcel customers, representing around 17,000 customers, or roughly 6 per cent of Australia Post’s parcel customer base. The fuel surcharge applies to business customers who send parcels via Australia Post (domestic parcels), StarTrack Courier, StarTrack Express and StarTrack Premium.
The fuel bills of supermarkets, transport companies and manufacturers will add inflationary pressure across the economy, given it’s a core cost for almost every part of the nation’s industrial base. Data released the day after the Reserve Bank lifted interest rates showed transport was the second-largest contributor to the annual inflation figure, rising 5.6 per cent over the year. Automotive fuel prices climbed 14.8 per cent in August, following a 7.5 per cent increase in July.
Meanwhile Coles and Woolworths are preparing to unveil their Christmas food, liquor and grocery offer on Thursday, against a backdrop of mounting inflationary pressure.
Led by Coles chief executive Leah Weckert, the Coles Christmas shopping basket is expected to feature a heavy reliance on private label or ‘home brand’ items as the supermarket giant looks to cater shoppers on a tighter budget this year due to rising interest rates, rents and other cost-of-living expenses. Woolworths is also expected to have a greater focus on home brand items for the holiday season.
Extracted in full from: https://www.theaustralian.com.au/business/retail/woolworths-triples-freight-fuel-levy-as-middle-east-war-threatens-new-supermarket-price-hikes/news-story/65e358727bf711a186771baaa6f741c2
