Coles' cut-price deal sees Foster's lead charge for its own wine

By John Durie and Richard Gluyas

FOSTER'S has taken its war with Coles over the price-cutting of beer and wine direct to bottleshop aisles, with employees of the brewing giant dispatched to buy up all bottles of Penfolds "Baby Grange" being sold at below cost.

In guerrilla-style raids on Coles First Choice stores, staff from Foster's, which owns Penfolds, grabbed about 100 cases of the winemaker's celebrated Bin 389 being sold at the loss-leader price of $37 a bottle.

The celebrated shiraz wholesales for $44 a bottle and usually costs drinkers $65 a pop.

The Foster's response, confirmed yesterday by marketing chief Chris Flaherty, is part of increasingly aggressive attempts by the brewer to prevent its brands from being used as loss leaders - products sold below cost to entice customers into the big supermarkets. As of last night Coles was undeterred, vowing to continue offering cut-price beer and wine to customers. "We will continue to test what the market and our suppliers will bear in order to provide our customers with the best deal," a Coles spokesman said.

Foster's has taken the unprecedented step of using a provision within the Competition and Consumer Act to withdraw supply of its beer products from Coles and Woolworths liquor stores.

Although deliveries were restored in a matter of days, the underlying cause of the fracas remains unresolved.

Australian Competition & Consumer Commission chairman Graeme Samuel declined to comment. However, an ACCC source said the regulator had observed no breaches of the act. "There is a lot of huff and puff in this," the source said. "We have a watching brief on it but, based on what we have seen so far, we don't believe there are any breaches of the law."

Foster's targeted Coles over its pricing of Victoria Bitter, as well as Woolworths in relation to Carlton Draught. It follows controversy over dramatic discounts on milk, eggs and other staples by the major supermarkets. The brewer is understood to draw a line in the sand when the retail price of VB falls below $32 a case. Coles yesterday denied reports it had offered the beer at $28 a slab.

"Foster's continues to supply Coles Liquor, and all Coles Liquor stores are fully stocked with the popular Foster's brands," a Coles statement said.

Foster's said it had not taken action against the retailers lightly.

"We recently withheld supply in a number of instances to preserve the value of our brands," a spokesman said. "We believe we are acting legally and we have the right to withhold supply where our brands are being loss-led.

"We are not targeting any particular customer, and we do not seek to prevent discounting, or influence retail pricing."

Foster's stands to make a tidy profit on the wine it bought back from Coles. Mr Flaherty was flabbergasted when he saw the sale price for Bin 389. After marshalling staff to buy every offending bottle they found, he confronted Coles liquor boss Tony Leon. At the meeting, Mr Leon offered to buy the wine back. Given demand for every vintage of Baby Grange outstrips supply, Mr Flaherty is in no hurry to part with his collection. Most of it will eventually be sold for about $780 a case.