Yahoo Finance Aussies struggling to pay bills not buying 'perfect storm' excuse: The CEOs now 'on notice'
CEOs will have to get used to frequent grilling as consumers - and now governments and regulators - watch prices like hawks.
It's official, 2024 is the year of the "price check", and as Woolworths CEO Brad Banducci found out this week, his replacement and other CEOs are going to have to get used to it.
The Woolies boss - dressed down like one of his shelf packers - lost his cool when grilled about price gouging in a fierce interview. But Australian consumers (and now governments and regulators) have started watching prices like hawks, and what we’ve found is that a lot of big businesses are speaking out of both sides of their mouths.
On the front pages, they say a ‘perfect storm’ of inflation has driven up their costs in ways they can’t control and they’re being forced to pass on those costs to us.
Meanwhile, in the business pages, public companies are bragging about increased profitability and the role that price increases - sometimes rebranded as ‘improved pricing’ - have played.
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But they can’t have their cake and eat it too - not in the eyes of consumers who are struggling to pay the most basic of bills.
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This is the year CEOs will be asked for a very public price check if their profits and prices are rising in sync.
And the roll call is getting longer.
CEOs boast as your premium keeps going up
Insurance premiums are up 16.2 per cent in a year. That’s the biggest increase in 23 years, according to the Australian Bureau of Statistics (ABS). The Insurance Council of Australia has trotted out the “perfect storm” argument repeatedly. It's a direct quote from CEO Andrew Hall.
But last week, two of the four biggest insurance companies in Australia reported booming profits alongside those price hikes. At IAG (home of NRMA, CGU and SGIO), CEO Nick Hawkins said cash profits were up 86 per cent in six months, while premium revenue was up 12.5 per cent. (Actual premiums rose more than that due to ‘improved pricing’ but they lost a few customers due to the price hikes.) He said the growth was reflective of premium increases and that they were on track for a $250 million insurance profit.
At QBE, annual net profit was up a staggering 131 per cent while premium revenue was also up 12.5 per cent for Australia. CEO Andrew Horton said QBE was showing greater "resilience" and told shareholders to "expect trading conditions to remain favourable in the year ahead'.
Telstra responds to increasing costs, by increasing your costs - and won't stop
Telstra too announced an 11 per cent increase in net profit for the past six months after they hiked prices by as much as 20 per cent on mobile plans back in June-July.
At the time, they said: “Increasing our prices means we can continue investing in the things that matter for our customers. Like most businesses in Australia, we are also responding to increasing costs.”
Chief executive Vicki Brady did not rule out slapping customers with another price jump.
“It’s obviously not appropriate for me to talk bout future pricing decisions on mobile,” she said. “We’re very pleased with the business, and I am really pleased to see more customers choosing Telstra.”
AGL 'acutely aware' of your struggle but netting profit
Two weeks ago, AGL CEO Damien Nicks assured customers: “We are acutely aware of the cost-of-living pressures both our customers and the broader community is under.” This was after the company hiked prices by around 20 per cent, on average, in 2023, while announcing a six-month net profit of $576 million.
It’s not even possible to say how much bigger that was compared to a year ago because, in that year, they lost $1.075 billion.
And don’t get me started on Qantas, which has become a cautionary tale for CEOs everywhere about what happens when you pursue profits at all costs and disrespect your customers.
Consumer revolt against supermarkets a warning to 'read the room'
Supermarkets are learning the hard way that, when prices and profits rise together, consumers will punish you.
Coles and Woolies copped flak in August for posting profits of $1.1 billion and $1.6 billion, respectively - both up by more than 4 per cent compared to a year earlier. Over the same year, food prices were up by 7.5 per cent, according to the ABS.
CEOs Leah Wenckert and Banducci, who’ll have to face a panel of tub-thumping senators and the Australian Competition and Consumer Commission later in the year, have argued that inflation has driven their costs up, that profitability means they can invest in their businesses, that their prices have risen less than food inflation in the general economy, that prices are now dropping, and that their margins are lower than a decade ago.
But consumers aren't taking it quietly.
Not only does consumer rage force governments to act - which is a major pain in the backside for businesses - but the reputational damage on platforms like TikTok and Instagram is real. Supermarket pricing memes are now rife online, alongside calls for boycotts and even theft.
Insurers will be next in the firing line if they don't read the room.
As 2024 rolls on, we’re going to find out which CEOs really have the common touch and those who are just counting the cash in their ivory towers.
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