Brumby’s boss quits over carbon tax furore as SMEs face reality of absorbing cost increases

Small business lobby groups believe many SMEs seeking to pass on carbon tax cost increases will keep quiet about the reasons for any price hikes, after seeing the furore bakery chain Brumby’s found itself in last week.

The Australian Competition and Consumer Commission investigated Brumby’s after the company’s general manager told franchisees to blame the carbon tax for general price rises.

Brumby’s general manager Deane Priest has resigned after his letter to franchisees was leaked to the media last week.

Retail Food Group, the listed company that owns the Brumby’s franchise, also launched an advertising campaign on the weekend, saying head office was to blame for the poorly-worded letter and consumers should not blame franchisees at the store level.

Brumby’s damage control efforts come as a report in Melbourne’s Herald Sun says a grieving family has complained to the Australian Competition and Consumer Commission over a $55 price hike on burial costs that were apparently blamed on the carbon tax.

Climate Change Minister Greg Combet described the allegation as “reprehensible”, although the ACCC has made it clear that businesses are entitled to increase prices due to the carbon tax, provided they can justify those increases.

The chief executive of the Council of Small Business of Australia, Peter Strong, says the Brumby’s incident has highlighted how carefully SMEs need to tread around the carbon issue.

“I think there is so much emotion and politics around it, that’s the problem.”

While COSBOA will release a carbon tax calculator in the coming weeks to help SMEs determine how their costs will increase, Strong says businesses that have worked out what carbon tax increase to pass on should be careful.

His advice to businesses is simple: Take the safe route and don’t mention the carbon tax if you don’t have to.

“If you can increase you prices without mentioning the carbon tax, then do it.”

Strong points out that businesses increase their prices every year for a variety of reasons – higher rent, higher wage bills, higher raw material prices – and often do so without explicitly explaining the reasons to customers.

Given the Brumby’s incident, Strong expects many businesses will keep quiet on the reasons for price increases unless they are asked to justify them.

Franchise Council of Australia chief Steve Wright expects many franchisees will decide discretion is the best policy and stay quiet about carbon-related price increases.

But he expects most franchisees will simply absorb any carbon tax-related cost increases, particularly in the ultra-competitive retail space.

“In more cases than not, business are having to potentially absorb the increased costs, rather than put prices up, simply because of competitive forces,” Wright says.

While the Brumby’s incident has provided a number of lessons about franchisor/franchisee communication, Wright says it also shows the dangers of franchisees showing off their political beliefs to customers.

Several Brumby’s franchisees were chastised for sticking anti-carbon tax posters in the shop windows.

“You can’t make the assumption that people share your beliefs, no matter what they are.”