The Victorian confectionery manufacturer faces becoming another casualty in the unseen supermarket war: Coles and Woolworths versus their suppliers. In a Fairfax Media investigation, suppliers and retail industry veterans have spoken, on the condition of anonymity, about what they see as dirty tricks used by Coles and Woolworths to steal their profits. Tactics include the deletion of brands such as Greenseas tuna to the benefit of Coles' private label brand; hardball negotiations including taking stock off the shelf until suppliers agree to new contracts; and demanding payment from suppliers for breakages that occur inside stores. The suppliers have wind in their sails from the federal Industry Minister, Kim Carr, who has asked the Australian Competition and Consumer Commission to look at their complaints. And Senator Carr notes it is not just suppliers who lose out, airing a grim prediction about what Australian consumers can expect if suppliers are brought low by supermarkets exerting too much power. ''Over time, if our supply chains are so badly damaged, our choices are limited, they are reduced,'' he says. ''For us to provide food security for this country, we need a strong supply chain of food manufacturers.''

Underpinning Carr's fears is a realisation the overt push by the majors to increase goods they sell under their own ''private label'' badge will inevitably shove well-known brands off the shelves. Woolworths has said it wants to double the amount of private-label goods it sells, which would lift private-label sales from about 20 per cent to British-style levels of more than 40 per cent. The research firm Nielsen estimates private labels will represent 40 per cent of packaged goods sales by 2015. The appointment of Ian McLeod as managing director of Coles in May 2008 from a career with British retailer Asda re-energised Coles's private-label drive, with imported staff from Asda and Sainsbury's credited with using their homebrand know-how to lead the charge. In lockstep with the growth of private labels is the fear many of these new products are being sourced from cut-price offshore manufacturers. For example, Coles Smart Buy pineapple slices, manufactured in Thailand and sold for $1.11, compete with Golden Circle pineapple slices manufactured in Australia and sold for $2.29. And Woolworths Homebrand frozen corn from China ($2.99) competes with Birds Eye frozen corn manufactured in Australia ($3.99).

Woolworths says more than half of its packaged goods are made in Australia. Coles was unable to provide a similar figure. THE power wielded by the two majors rests in supermarkets' domination of the broader food and grocery market, with their market penetration growing from 40 per cent in 1975 to 60 per cent in 1985. Their combined take now stands at about 80¢ of every grocery dollar spent, leaving suppliers operating in a climate of fear: lose one of the big supermarkets as a customer and that could be the end. The suppliers' view of their situation is reflected in the surly vernacular about price negotiations with Coles's ''buyers'' at its Melbourne headquarters, unflatteringly dubbed ''Battlestar Galactica''. Suppliers talk of the practice of ''cliffing'': being forced to bid high for existing shelf space, or lose it all to a higher-bidding rival. To follow the metaphor, the failure to pay up results in being thrown off the cliff.

Greenseas, owned by Heinz, experienced just this practice earlier this year when John West successfully bid for shelf space, leaving John West and Coles home brand products as the major beneficiaries. Price negotiations with supermarkets are widely known by an even more colloquial term. One industry veteran said: ''We all call it 'assuming the position'.'' In other words, bend over and take what's coming. And it is not just the smaller manufacturers targeted by the big supermarkets that find themselves in awkward positions. Fairfax Media has established that major global brands Coca-Cola and Nestle have been pushed around in recent months. Coca-Cola was not advertised in Woolworths catalogues, a punishing move for even the biggest brand; and Nestle was told to withdraw its sales staff from Coles stores after what is understood to be a contract dispute. A Woolworths spokeswoman denies it seeks shelf space fees. She says of tactics such as taking stock off shelves and refusing advertising during a renegotiation: ''We will look to advantage the products from which we can get a return in order to achieve category objectives.''

A Coles spokesman refused to comment on the details of its supplier relationships, describing its dealings as robust and within the law. ''Coles wants to retain and grow all of our trading relationships with suppliers,'' he says. The pressure on Australian-branded suppliers is inevitable, says British retail expert David Hughes, who sees the shift to private labels as an international trend. He says supermarkets worldwide are becoming dominated by the retailers' private-label brands at one end and large, multinational or national ''A'' brands, such as Coca-Cola and Nestle, at the other. ''If you happen to be in the middle there, the 'B' brands, you are going to be squeezed,'' says Hughes, a professor at the University of Kent Business School. ''If you come to the UK it's exactly the same. It's an uncomfortable time to be in the food industry.'' The easy comparison drawn from history is between Australia's food industry, now under pressure from retailers and multinational competitors, and the (almost vanished) textile, clothing and footwear industries that could not withstand cheaper competition from offshore.

Kate Carnell, chief executive of the Australian Food and Grocery Council, rejects the comparison. ''Are we quite comfortable with relying on imports for our food supply? I would suggest we're not comfortable, I would suggest it is different,'' she says. Suppliers and industry veterans spoken to by Fairfax Media paint a gloomy picture. They spell out a vicious cycle in which the big supermarkets' tactics make their brands progressively weaker. It is little known that ''mark downs'', or sales, offered by the supermarkets are partly or fully funded by the supplier. This is a difficult concept, but it essentially means the suppliers take some (and usually all) of the hit on sales discounts, not the retailer. As supermarkets' demands for sales have become more voracious, there is more demand for ''mark downs'' - and therefore more need for suppliers to take the hit. So in the view of industry experts, a brand faces pressure on its finite ''brand-building'' funding, driving it from an ad campaign for its own benefit (''Buy Vegemite because it is great'') to a price-driven campaign for the retailer's benefit (''Buy Vegemite at Coles because it is cheap'').

''The manufacturer funds all the sharp prices,'' says one supplier's account manager. And if the other big retailer sees those sharp prices, you can bet they are instantly on the phone demanding the same kind of discount - and the supplier takes double the hit. Retail veterans complain the result is a lack of innovation in brands, with any innovations quickly mimicked by private-label brands anyway. AT COLES headquarters in Toorak Road, Melbourne, there is what is known as a ''celebrate success'' bell, which is rung in the open-plan office at certain times. The sizeable bell stands in a wooden frame about a metre high, and it resounds through the office when the clapper is struck. The supplier account manager says: ''I have been on the floor when the bell has been hit. My guy has to scurry away … us vendors [are left] sitting in the little fish bowls.''

Fairfax Media has learned the bell is rung when a Coles buyer has managed to extract a bigger concession from suppliers. The ''success'' is put on a whiteboard in terms of the savings for Coles, and the huddle of buyers are told to continue their efforts. The account manager says the experience is gutting for the waiting suppliers: they know one of their own has just ''assumed the position''. Coles chose not to respond to questions about the ''celebrate success'' bell. Loading Professor Hughes makes the point: ''… When you have a great deal of market power in the hands of one or two retailers, you will have abuses of power. That's in the nature of things.'' Senator Carr says Coles and Woolworths enjoy among the highest concentration of market power in the world. Urging suppliers to contact the ACCC, he says: ''This is all about the extraordinary power they hold.''