Federal Government-owned Outback Stores faced questioning today over the pricing strategy used at 40 stores it supports in remote communities across Australia.
A Federal parliamentary committee wanted to know why it was charging its mostly Aboriginal clients double what other consumers were paying for items such as orange juice, lettuce and even toilet paper.
Outback Stores and other operators of the sole stores in isolated communities have been accused of price gouging and other forms of profit-taking from vulnerable customers, particularly during COVID-19 lockdowns.
It was the reason the Indigenous Affairs Committee of the Federal Parliament was directed to find out what was in fact going on.
In April there was a clash between Outback Stores and the Aboriginal Investment Group over claims one was stockpiling goods at the expense of the other.
Outback Stores is a Commonwealth company established in 2006 and operates many general stores in remote areas of the NT including Beswick, Ngukurr, Dungalan and many others.
Outback Stores supports stores across the NT, Western Australia and South Australia which are usually governed by community based boards.
The company was formed in 2006 from a need to improve the health of Indigenous people in remote Australia by addressing nutrition-related health problems, unreliable food supplies, stores closing because of poor management and build-up of debt.
Chief executive officer Michael Borg told the committee today most of their price comparisons were done against roadhouses or "convenience" stores in nearby towns.
He said the tried not to compare prices with supermarkets because they did not have the same buying power.
"We are very strong on affordable pricing on key items," he said.
Some items deemed less healthy such as orange juice with high sugar contents were marked up, he said.
Policies to drive up the cost of sugary drinks and drive down demand had worked, Mr Borg said, pointing to chronic diabetes problems in many Aboriginal communities.
Some of the other prices raised by the committee such as toilet paper were inflated for a short time because of panic buying in the cities which meant they had to source other stock often containing more toilet rolls than they generally sold.
"We sell water for a dollar, I bought the same bottle today in Darwin for three dollars," Mr Borg said.
He pointed to the high operating costs of remote stores which had few customers and high freight costs.
Mr Borg said Outback Stores worked to provide food security to these stores and nutritious food as well.
Plus they marked prices down on staple items like flour and powdered milk, he said.
Mr Borg agreed with members of the committee they were well supported during the COVID-19 lockdowns with support of in demand goods from Coles and Woolworths.
Committee members believed Outback Stores could look to forming permanent relationships with a bigger supermarket chain to use their buying power to lower prices.
Back on May 7, Mr Borg said Outback Stores had seen a 75-100 per cent rise in sales largely due to the extra $550 per fortnight in in payments to income support recipients.
"We are excited to be working closely with the committee in the weeks ahead with sharing information that could benefit this review with an aim to seeing successful outcomes for our industry in the future," Mr Borg said.
The inquiry has a specific focus on access to affordable fresh and healthy food, groceries and other essential supplies and the environment in which remote community retailers operate.
"Our main focus in recent years has been driving prices down on high volume staple products such as fresh fruit and vegetables, flour, fresh milk, bread, powdered milk, UHT milk, eggs, Weetbix, oats, rice, diet soft drink, bottled water and other key items including nappies and baby formula," Mr Borg said.
"Traditionally, a lot of focus has been placed on freight when discussing pricing and food security in remote community stores and whilst this cost is significant, it's easy to overlook the inevitable issue of high operating costs.
"Staffing, housing, travel, insurance, power, repairs, maintenance, accounting, governance, supporting services as well as a high cost of goods are all significant factors that any reliable and professional operator needs to incur whilst managing in remote environments.
"We know remote community stores require a high level of governance with solid controls and strong processes to achieve consistent positive financial and social outcomes," Mr Borg said.
"Outback Stores supports communities that have a small population and or low store turnover. Twenty-six of the forty stores we manage on behalf of store owners are not financially viable. Without our financial support these communities would not have ongoing food security.
"Retail is one of the only dependencies in a remote community that stands alone without ongoing government support. We believe that areas such as expanded licensing controls, broader infrastructure support, ongoing subsidies to offset essential services, and most importantly a piece of work on cost of goods within the Australian manufacturing sector, could all bring long term benefits for the future."
The Committee is due to present its final report by the end of October.
The National Indigenous Australians Agency has launched its first ever "basket of goods" analysis across hundreds of stores in remote communities across Australia to check whether price gouging claims are correct.
That first sweep of about half of all stores is expected to finished within a month and handed to the Federal Government.
Lingiari MHR Warren Snowdon is deputy chair of the committee.
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