Updated ,first published
A senior Coles manager has conceded the supermarket giant worked with a supplier to make a product more expensive while still claiming to have discounted it, admitting the company raised its price between specials only so it could keep it on its “Down Down” promotion.
Coles’ manager of health products Matthew Hankin told the Federal Court on Thursday that the company’s March 2022 decision to increase the cost of Colgate toothpaste from $5.50 to $7 for four weeks before marketing it as “Down Down” to $6, was a deliberate strategy.
Australian Competition and Consumer Commission barrister Emma Bathurst put to Hankin, who has worked for Coles since 1987, that the plan from Colgate was to essentially move from a “Down Down” price of $5.50 to $6. He agreed.
“And the only reason that the product was sold for four weeks in between at $7 on a white [regular price] ticket was that Coles could comply with its internal guard rails,” Bathurst suggested. “Correct, to… implement the ‘Down Down’ [discount],” Hankin said.
The commission is seeking to prove its misleading discounts case against Coles by arguing the supermarket giant raised prices on a sample of everyday items so it could then falsely claim to have put the products on special. The chain is fighting the claim, arguing its price rises were caused by supplier pressure, inflation and market forces, while the subsequent discounts offered genuine savings.
Hankin had earlier agreed that Coles typically agreed to price rises demanded by a supplier alongside a plan for discounts. Asked by Bathurst about the appeal in using the “Down Down” shelf label, Hankin said the fact it included a price comparison demonstrating the discount made for “a stronger callout, a stronger activation” and was more “compelling” to shoppers.
Earlier, a former Coles manager who set prices for its pet foods has hit back at the suggestion increasing sales and earning money was the chain’s only motivation for putting a product on special, as the supermarket fights a Federal Court case alleging it misled shoppers with its “Down Down” discounts.
The court heard an at-times testy exchange between the Australian Competition and Consumer Commission’s lead barrister, Garry Rich, SC, and Paul Carroll, who was the head of Coles’ pet food category, on Thursday in Melbourne.
Dog food is one of the key goods that the ACCC is examining as it tries to show that the supermarket chain offered customers false discounts by increasing the price of products before offering specials that resulted in the items costing more than their initial price.
The court heard that Coles priced Nature’s Gift Wet Dog Food in a 1.2 kg tin at $4 between April 18, 2022, and February 7, 2023, was then increased to a $6 “Every Day price” for a seven-day period, before the supermarket cut it to its third price, $4.50.
Coles promoted this price with a red “Down Down” discount label, despite it being 50¢ more expensive than it had been sold at eight days earlier, in a move it has since acknowledged was an error and against its internal pricing “guardrails”.
Rich asked Carroll about the difference between “Every Day” and “Down Down” pricing, along with the internal rules Coles had for when to change them as well as for applying further temporary discounts or increases known as “surging”.
Rich put to Carroll that when negotiating price change requests with suppliers, he was motivated to agree on the new price as well as a plan to reduce it to a cheaper “Down Down” promotional price and red shelf ticket for a longer period. Rich said this was because promotions increased product sales.
“You’re not being charitable, you are doing it to earn money for your employer,” Rich put to Carroll, who disagreed with the statement, insisting he personally cared about the customer and prices they faced.
Rich repeatedly put to Carroll that different aspects of his evidence were untrue, which Carroll rejected.
The court heard further evidence from email exchanges between Carroll – who is no longer in the dog food role – and other Coles colleagues as well as the supplier of the dog food in question.
On 10 February 2023, two days after the dog food had increased to $6, Carroll emailed then-head of pricing and value Chris Reid, asking for advice about how to be more competitive with Woolworths in selling the product, which had a price of $4.50. Reid told Carroll the price could be lowered to compete with other retailers once a four-week window at $6 had passed, but not advertised as a “Down Down” special, as it wouldn’t be “in the spirit” of “Down Down”.
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Elias Visontay is a National Consumer Affairs Reporter at The Sydney Morning Herald and The Age.Connect via email.
Jessica Yun is a business reporter covering retail and food for The Sydney Morning Herald and The Age.Connect via X or email.
