A former supplier to Woolworths claims the retailer replaced its top-selling Australian-made cosmetics with similar products from elsewhere.
G and M Australian Cosmetics said the replacements had very similar labels and bottles, forcing them to take legal action.
The company has been supplying retailers with Australian-made skincare products such as Emu Oil moisturising cream for about 20 years.
G and M Australian Cosmetics had told its suppliers that it wanted to increase the wholesale price of its skincare products, insisting they would still sell well and while other retailers accepted the price rise, Woolworths did not.
Zvonko Jordanov, the company founder and managing director, said the decade-long relationship with Woolworths then ended abruptly.
“They’ve been lost, I think, a little bit in their way of communicating with the Australian market,” he said.
He said Woolworths requested to speak to the company and then informed them that they did not want to continue doing business with them.
Mr Jordanov said that was despite their products being the best selling in Woolworths “for the least three years in aggregate”.
“We were always selling any single product nationally in Woolworths, and we were growing about 50 per cent in value and 41 per cent in volume in Woolworths shops,” he said.
Look-alike products removed from shelves
There is nothing unusual about a retailer and a supplier disagreeing over wholesale prices and Woolworths, as a listed company, has shareholders to satisfy.
But Mr Jordanov said Woolworths then replaced the products with containers and labels that were so similar to G and M Australian Cosmetics products that they took legal action against the manufacturer.
It cannot be named for legal reasons, and G and M reached a confidential settlement.
Mr Jordanov said he was not allowed to comment on the issue, but said it had all been settled in a “nice manner for us” and he said all of the look-a-like products had been pulled off the Woolworth shelves.
The ABC approached Woolworths for a response and a spokesperson said earlier in the year the supplier had requested a significant and unsubstantiated price increase from Woolworths.
When Woolworths did not agree to the pricing proposal, the supplier withdrew its products from the stores.
Woolworths said it was committed to delivering quality products at the lowest prices for customers.
G and M doing well despite losing contract
Despite losing the Woolworths contract Mr Jordonav’s company has been doing well.
He said they were succeeding in the Chinese market, especially since setting up an office in Shenzhen.
“Because of the Chinese mentality that they don’t like actually to buy the product through the second-hand distributor or somebody who is actually not the company,” he said.
“Now that means that all Chinese [buyers], they are buying direct from G and M.”
The Chinese are keen on products like moisturising creams with exotic Australian ingredients, from Macadamia oil to Kakadu plum.
In recent weeks G and M won a Hong Kong Australia business award and an international manufacturing award sponsored by the Export Council of Australia and the New South Wales Government.
G and M Australian Cosmetics was also a finalist in the Ethnic Business Awards.
The company began in a garage and now fills a large factory in Sydney, and Mr Jordanov said he was proud of the company and its diverse workforce.
“Very typical Australian company actually, it’s completely multicultural — we have maybe 20 different nationalities working in our company in this moment,” he said.
“Our growth is pretty good, our export is nearly doubling now year by year [and] we’ve been recognised this year with a few awards as well.
“So it’s going OK now.”