Major supermarkets’ decision to discount lamb cuts as high as 30 per cent recently has left small butchers reeling, as independent owners struggle to pass on the extraordinary saleyard prices.
The relentless rise of eastern states saleyard sheep and lamb indicators hit 513 cents a kilogram and 651c/kg respectively this week, an increase of 106c/kg and 22c/kg since sales resumed this year.
Small butchers have responded by slashing their shelf space allocated to lamb for cheaper proteins including pork and chicken.
Meanwhile major supermarkets have discounted various lamb cuts which Australian Meat Industry Council’s Retail and General Industry Group councillor Trevor Hill said did not reflect the true products’ value and damaged lambs’ “premium” reputation.
“They’re wasting levy payers money by promoting the product as world class and then putting it at a third world price,” Mr Hill said.
Mr Hill has slashed lambs purchased for his three Bruce's Meats stores in metropolitan Adelaide, from 50 carcases to 20 a week in the past three years.
He accused Woolworths and Coles of putting a squeeze on independent butchers who were struggling to pass on the price increase this year.
“Supermarket discounts are driving consumer sentiment towards lamb but they’re driving it the wrong way – they’re allowing the commodity to be under-priced by those that control the market,” he said.
“How do you control market forces? I think farmers need to take the bull by the horn and actually control who they supply - vote with their lambs.”
Mr Hill said he was aware of several butchers “on the verge” of closing shops due to their inability to compete with major supermarkets’ red meat prices.
“We’re heading towards a peak to that outcome,” he said.
“There will be less opportunities to take farmers’ products to the market because there will be less independent suppliers in the retail sector.”
Consumers may be reaping the rewards of the lamb price war between Coles, Woolworths and Aldi, but industry concerns are growing about the sustainability of the supermarket battle.
Mr Hill warned producers and small butcher owners would be the casualty of the slashed supermarket prices.
Woolworths have reportedly poured more than $1 billion into lowering prices in a year, and as a result reported stronger sales growth than Coles for the first time in eight years in the first half.
In its third quarter sales update this month, Woolworths reported a 2.5pc fall in checkout prices, partly attributed to absorbing higher costs for meat, particularly lamb.
MLA board member and meat retailing specialist Allister Watson defended the supermarkets’ decision to discount lamb, claiming it was a “balancing act” for the Coles and Woolworths who purchased up to 50,000 lambs per week.
“If they have a surplus of legs or a surplus of shoulders, they need to put them on sale to balance the market,” Mr Watson said.
“You have more shelf-life with beef products which can be utilised for a longer time, whereas lamb needs to be used within seven to 14 days so the pressure is on when there is an imbalance which drives promotional activity.”
As an ex-retailer, Mr Watson said prices were dictated by what customers would pay for products.
“It doesn’t matter what you pay, what the retailer will sell it for is a price they think is fair for customers to bring them in the door to buy other groceries,” he said.
“The problem is how long people absorb the high prices when consumers aren’t willing to pay anymore for it – that is the big question.”
“If exports are willing to pay more, and price is driven by export at the end of the day, retailers, small butchers and large supermarkets, will have to make the decision whether they pass it onto the customer.”
A spokesperson for Coles defended the decision to discount meat as a competitive tactic.
“For many families, meat can be the biggest purchase in their weekly shop, so for Coles it’s very important that our customers can buy great quality Aussie meat at the right price,” they said.
“Customers tell us that meat is a key factor in where they do their weekly shop. We've got to have great quality, price, range and availability if we want our customers to choose Coles, and that's exactly what we're delivering."
Woolworths did not respond.