http://www.stuff.co.nz/stuff/0,2106,3689305a11,00.html
Food suppliers say they are struggling with the new Australian owners of Woolworths and Foodtown, who are using hardball tactics in New Zealand.

The New Zealand Herald said Woolworths Australia had threatened to ban suppliers' products or downgrade their position on shelves unless it gets discounts of 10 to 15 per cent.

The usual terms were around 5 per cent, suppliers spoken to said.

There was no option but to accept demands because of the company's market share, meaning suppliers' margins were getting extremely tight.

One company said it may have to shed jobs and prices would have to go up, but several others said Woolworths' tactics included not accepting price increases from suppliers.

Woolworths came into New Zealand late last year with a $2.6 billion takeover of Progressive Enterprises, owner of Foodtown, Woolworths and Countdown supermarkets.

With annual revenues of about $32 billion, Woolworths will dwarf its only rival in New Zealand, Foodstuffs, which has turnover of about $6 billion.

Foodstuffs Wellington managing director Tony McNeill said he would complain about Woolworths' tactics to the Commerce Commission, and to politicians. Progressive Enterprises said it was keeping the two countries separate in its dealings, despite allegations of it treating the two as one market, and denied being unscrupulous when it came to negotiations.

I was really disturbed when I saw this story this morning. I thought "Thus begins the downward spiral." If the suppliers give into Woolworth's demands, nothing good can come of it. Certainly consumers who shop at Woolworth's will see 'lower prices' on the shelves, but they will pay a much higher price everywhere else, as supplies shed jobs and degrade their products to meet these ridiculous price demands.

We've seen it here in the US as those *few* US-based companies that sell stuff to Wal-Mart (as most of it comes from China) have been similarly forced to cut their prices. As a result, some companies are able to become 'more effecient' (read: cut payroll and jobs).

I hope this isn't a harbinger of more to come.