Woolworths is accused of putting suppliers in a vice. Photo: Reuters

WOOLWORTHS is looking to squeeze price cuts from scores of suppliers to help fund its price war with Coles – and buyers from the supermarket giant have threatened to remove products from the shelves if the demands are not met.

In what one food manufacturer described as ”the most brutal negotiations that I have experienced in my three decades in the industry”, a number of suppliers have been given two weeks to find cost savings of between 5 and 10 per cent, or face being removed from the aisles.

The independent senator Nick Xenophon, an outspoken critic of the combined 80 per cent market share of Woolworths and rival Coles, said yesterday he would call for Woolworths to be pulled before a Senate inquiry to explain its actions.

Just five months after the chairman of the Australian Competition and Consumer Commission, Rod Sims, called on suppliers to dob in supermarkets that abused their power, suppliers to Woolworths have been told to slash their ”trading terms” – industry jargon for the net cost of supplying their product.

”We were told straight out to find a reduction in terms or we wouldn’t be stocked any more,” said a managing director of one Woolworths supplier.

The Australian Food and Grocery Council issued a briefing note to its members this week advising them of the cost cuts. The note said Woolworths had justified the cuts by claiming suppliers were price-gouging.

Woolworths was believed to have used a consultant’s report to justify the cost cuts, the letter said, but had not released details of that report to suppliers. ”In most cases … companies have been asked to respond within two weeks to the request,” the letter said.

A Woolworths spokeswoman, Claire Kimball, said there was no two-week cutoff in its negotiations and ”nothing unusual happening at the moment”.

”When we put our position to vendors we often ask them to come back to us in two weeks with their response,” Ms Kimball said. ”However, it is a negotiation and this often necessitates ongoing discussions.”

She added: ”Negotiating terms of trade is something we do day in and day out. Any conclusions reached in negotiations have to be mutually agreed.”

The AFGC letter also said it had shared its concerns with Andrew Hall, director of corporate and public affairs at Woolworths, and Tjeers Jegen, managing director of Woolworths’ supermarket and petrol division.

Senior management at Woolworths and Coles have denied claims they use their market dominance to pressure suppliers. The AFGC briefing, however, notes ”the disconnect between commentary from senior executives within Woolworths and the behaviours of trading teams and buyers”.

Yesterday the boss of a big supplier told the Herald: ”Due to Woolworths’ market-share loss [to Coles] they have been using their dominant size in the industry as a blunt negotiating instrument to demand list price reductions.

”They have no interest in understanding the impact that their unreasonable demands would have on our business, but are using their 40 per cent-plus share of the market as a brutal implied threat. This is only about boosting Woolworths’ margins … there has never been any discussion about passing the cost reductions on to consumers.”

The Herald can reveal more than 50 suppliers have contacted the ACCC with complaints about the big supermarkets. Yesterday the watchdog said its confidential talks were progressing well. It is expected to report its finding by the year’s end.

But Senator Xenophon said the 50 figure was just the ”tip of the iceberg”, noting that ABC TV’s Lateline had contacted 100 suppliers in vain to speak out publicly.

Careful what you wish for … the new planning rules could remove your right to block a development.

• An example of a ‘plain English’ local plan

NEW ”bold and daring” planning laws will end the practice where complaints from individual residents can block or modify proposed new developments, the state government has revealed.

Within weeks the government will release a revolutionary overhaul of the 33-year-old planning act that the Planning Minister, Brad Hazzard, said will end uncertainty faced by developers who buy land not knowing if their plans will be approved when they submit development applications.

“It will be a case of full steam ahead” … Planning Minister Brad Hazzard.

Mr Hazzard said he was determined to end the current practice where individual development applications turn into ”site-specific planning wars” and introduce a system where communities agree in advance on building types, heights and densities for a whole area. Once such agreements were reached they would not be varied and developers could get on and build.

”The government’s direction will be around giving communities a voice upfront in the strategic planning of their areas but, having done that strategic planning, it will be a case of full steam ahead,” Mr Hazzard said.

With new home construction rates at 50-year lows, Mr Hazzard told a Housing Industry Association breakfast the new laws would give developers the certainty needed to build.

With public trust in the planning system shattered by the previous government, he agreed that it would be a challenge to get enough residents involved in discussions that would determine what developers could build where under the new system.

”We will have to make sure communities switch on at a much earlier stage, make sure they actually listen to the fact there’s a strategic plan going on in their area but, having done that, those who provide the housing, those who provide the offices, business spaces should know that if they provide this particular parcel of land they can get on with it,” he said.

Developers welcomed Mr Hazzard’s plans but agreed it would be difficult to get enough community members involved early.

”The core thing the industry is calling for is certainty,” the NSW executive director of the association, David Bare, said.

”I agree [getting community involvement] is a challenge, but it’s one we have to try to address. I don’t claim to have all the answers on how you do it, but the minister also made the point people need to stand up and take notice.”

Mr Hazzard said two former NSW government ministers, Tim Moore and Ron Dyer, had given their report to him on the planning system but the government only agreed with parts of it and had decided to delay releasing it until it had finalised its position.

”And I can tell you that when we release both the independent review and the government’s response to that it will be bold, it will be daring and in my view make a major difference,” Mr Hazzard said.

Comment at BusinessDay