Aussies, Get Ready for Price Rises, then Shortages, By James Reed
Australian suppliers are sounding the alarm: without price increases from the nation's dominant supermarket chains Coles and Woolworths, many food and beverage businesses face collapse or severe contraction amid a fresh wave of cost pressures. A detailed report in The Australian on April 13, 2026, highlights how the ongoing Middle East conflict with Iran, has driven sharp rises in diesel, shipping, packaging, and raw material costs, squeezing suppliers who say they can no longer absorb the hits without passing them on.
The Immediate Triggers: Fuel, Freight, and Geopolitical Shock
The core issue stems from the escalation in the Middle East, which has pushed global oil and diesel prices higher. For one prominent example, Bundaberg Brewed Drinks (the family-owned Queensland maker of Bundaberg Ginger Beer and other beverages, employing 280 people) has formally requested a temporary surcharge from both Coles and Woolworths. Their CEO, John McLean, reported diesel fuel costs up almost 39%, rippling through every stage of operations—from farming ingredients and manufacturing to distribution.
Shipping disruptions have compounded the pain: carriers like ZIM and ANL are imposing surcharges of US$300–700 per 40-foot container on top of base rates around US$2,300. Packaging materials (plastics and more) have also soared. McLean was blunt: "If we don't pass this on, the business won't be the same in the end, we may be out of business and many businesses will be the same way." He stressed the requests are not about adding profit margins but simple survival: "We don't want our consumers to have to pay a cent more… We are not adding any profit into this—we are trying to just be sustainable."
Other suppliers are in similar straits. Dairy giant a2 Milk downgraded its FY26 revenue and profit forecasts due to supply chain chaos affecting exports to China, including volatile sea and air freight plus processing backlogs. Shares dropped 13% on the news. Broader warnings from farmers and independent retailers suggest impacts on fresh produce, meat, dairy, and processed foods, with some industry voices (including NSW Farmers) floating potential spikes of 10–20% on certain items if costs cannot be absorbed.
The Supermarket Duopoly Dynamic
Coles and Woolworths together control roughly two-thirds of the Australian supermarket market, giving them enormous leverage in negotiations. Under the Food and Grocery Code of Conduct, price reviews typically involve 30 days of negotiation, creating a lag of 4–13 weeks before any increases reach shelves. Both chains have confirmed receiving supplier requests for price hikes, but they have been absorbing some costs to maintain competitive positioning and loyalty programs amid ongoing "grocery wars."
Retailers face their own pressures: low net margins (often 2–3% after tax at group level) mean they cannot endlessly swallow supplier increases without eventually adjusting shelf prices. However, public and political scrutiny remains intense. Accusations of price gouging have dogged the sector for years, prompting new excessive pricing bans under the Grocery Code that take effect on 1 July 2026. These rules prohibit very large retailers from charging prices deemed "excessive" relative to supply costs plus a reasonable margin, with penalties up to $10 million or more.
Suppliers argue the current crisis is different — driven by external, unforeseeable shocks rather than internal profiteering. Without relief, reduced supply, business failures, or scaled-back production could follow, ultimately harming choice and availability for shoppers.
Timing and What Shoppers Can Expect
Price rises are not immediate but are building behind the scenes. Early signals point to fresh categories (dairy, fruit, vegetables, meat) being hit first due to their heavy transport and fuel dependency. Some analysts and industry groups expect noticeable increases within weeks to months, depending on how long elevated fuel and freight costs persist. Average family grocery bills have already climbed significantly in recent years, with some estimates placing weekly spends around $320 for a typical household in 2026.
The cost-of-living crisis adds urgency: many households are already stretched, making any further grocery inflation politically and socially sensitive. Government responses include calls for a national food supply chain assessment, while some have urged temporary measures on fuel or freight. However, the conflict's unpredictability makes forecasting difficult.
Broader Implications for Australia
This episode reveals structural vulnerabilities in Australia's food system:
Heavy reliance on imported fuel and global shipping exposes the supply chain to distant geopolitical events.
The supermarket duopoly's power creates tension: strong negotiation leverage can keep some prices lower in the short term, but it also risks squeezing smaller suppliers to breaking point.
New anti-gouging laws aim to protect consumers but could complicate legitimate cost pass-throughs, potentially leading to supply disruptions or higher long-term prices if retailers or suppliers cut back investment.
For regional and family-owned businesses like Bundaberg, the stakes are existential. For consumers in Melbourne and across Australia, the message is clear: grocery bills that already feel painful could rise further in the coming months, particularly on staples.
Realistic Outlook
Suppliers are not crying wolf lightly—these are documented, external cost surges tied to diesel (+39% in some cases), freight surcharges, and disrupted global trade. Coles and Woolworths will likely negotiate hard, absorbing what they can while passing on unavoidable increases with some delay. Full 20% spikes across the board seem extreme and category-specific at worst, but targeted rises in fresh foods and beverages are probable.
In a high-cost environment, options for households include shopping around (Aldi, independents, markets), focusing on seasonal/local produce, meal planning, and bulk buying where possible. For the economy, sustained supplier stress risks reduced innovation, fewer Australian-made products, and greater import dependence.
The coming price pressure is a reminder that global events hit local wallets fast. Survival for suppliers and affordability for families both matter—balancing them without knee-jerk regulation or unchecked profiteering will test retailers, government, and consumers alike in 2026. Watch dairy, soft drinks, fresh produce, and packaged goods closely over the next quarter.
