Woolworths opens up on the rising input costs its suppliers are facing

All those supplier cost increase requests were assessed carefully on their merits, with the need to balance affordable groceries to households while maintaining mutually viable supplier relationships, the big fresh food retailer said.

In a submission to the Australian Parliament's Agriculture Committee Inquiry into Food Security, Woolworths said it was acutely aware that the rising cost of living was a significant concern for many Australian households.

A primary driver of shelf price inflation had been the higher wholesale prices it was paying to suppliers, the submission said.

"About 70 cents of every dollar spent in our stores goes to the cost of goods and transport. A further 25c goes to team wages, electricity and other operational running costs - leaving less than 5c in every dollar as our operating profit before tax and interest," the supermarket revealed.

The inquiry was launched to examine ways to strengthen and safeguard food security in Australia and will focus, in particular, on local food production and the impact of supply chain distribution on the cost and availability of food.

It has so far received more than 150 submissions, one of the largest on record for any parliamentary inquiry, but certainly in the agriculture sector.

The committee met this week and is working its way through the submissions.

It has extended the period for accepting submissions indefinitely.

Public hearings are about to kick off around the nation and the committee is looking to file a report by the end of the year.

Woolies is a part of communities right across Australia, with more than 1300 supermarkets, BIG W shops, distribution centres and support offices employing more than 185,000 people. In regional areas, it has more than 400 stores.

It prides itself on being Australia's 'fresh food people', sourcing 96 per cent of all fresh fruit and vegetables and 100pc of fresh meat, milk and eggs from Australian farmers and growers.

About 75pc of Woolworths' own brand food portfolio is manufactured in Australia.

It's submission to the inquiry said poor growing conditions and flooding, along with rising input costs and global instability, had been driving up local food prices in both fresh and long life grocery categories.

It pointed out that was not just an Australian phenomenon, with grocery inflation in Australia actually lower than rates seen in the United States, Canada and the UK.

Woolies has put in place a number of measures in response, including freezing the price of hundreds of key staples, running promotions with 6000-plus items on special every week and ensuring its Odd Bunch range of fruit and vegetables sells at a 20pc discount.

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The company recognised the challenges for farmers with access to, and the rising cost of, key inputs such as fuel, fertiliser and labour.

"We have also faced challenges in our own operations in the sourcing and availability of key inputs, such as packaging, machinery parts for our equipment in distribution centres or energy sources," the submission said.

"Woolworths, like others in the supply chain, is reliant upon key inputs either for our own brand products or those of our supply partners that are sourced from overseas."

It mentioned the AdBlue fuel ingredient as an example.

The submission also gave some insight into the unprecedented nature of the pandemic disruptions to supply chains.

It said over the course of several weeks in March 2020, huge surges in demand led to product shortages.

"There is enough stock in supply chains to withstand a degree of fluctuation, but the demand surge at the height of COVID-19 was truly unprecedented," the submission said.

"In effect, Woolworths experienced - virtually overnight - an increase in demand to levels that reflected a population of 50 million, albeit against the backdrop of a highly efficient system built to play its part in feeding 25m Australians."