When Your Biggest Customer Becomes Your Biggest Risk: A Commercial Reality No One Wants to Admit
John Elliott • May 8, 2025

In the FMCG and food manufacturing sector, we glorify customer wins. The logos on pitch decks. The volume metrics in board reports. The partnership language that implies mutual growth.


But here’s the uncomfortable truth:
Many mid-market FMCG businesses are quietly being crushed by the very customer relationships they once celebrated.


So let’s ask the real question:
What happens when your biggest customer becomes your biggest liability?


A Dangerous Dependency No One Wants to Own

Australian suppliers are no strangers to margin pressure. Whether you’re supplying Coles, Woolworths, or Costco, the power dynamics are rarely in your favour.


A 2024 report by PwC shows that while 85% of Australian CEOs believe their businesses will remain viable for a decade if they maintain current strategies, the same report highlights a global shift towards faster business model reinvention — driven largely by dependency risks and commercial stagnation.


In other words, the Australian market has become dangerously complacent.

Companies stay anchored to one major retail relationship — because it’s familiar, because it’s comfortable, and because no one wants to say what everyone already knows: This relationship is now costing us more than it makes.


The Structural Trap — Why Choice is an Illusion in Australian Retail

And it’s not just about comfort. It’s also about limited choice.

Australia’s grocery retail landscape is one of the most concentrated in the developed world. Woolworths and Coles account for over 65% of the total market. Add Aldi and Costco, and four players control the overwhelming majority of national grocery volume.

This leaves most mid-market FMCG suppliers with only two real options to scale. You either win one of the majors — or you don’t grow. There’s no Tesco vs Sainsbury’s. No Target vs Kroger. No regional chain ecosystem to spread risk.

So when a Woolworths or Coles listing lands, businesses go all in — not because they’re naive, but because structurally, they don’t have a viable alternative. And once they’re in, the retailer holds all the cards: promotional demands, packaging changes, supply chain compliance, and extended payment terms.

This is how overexposure starts: not as a failure of strategy, but as a feature of the system.


The Margin Myth: “Strategic Partnership” or Slow Suffocation?

The term “strategic partner” implies shared goals and equitable benefit. But in many supplier-retailer relationships, that’s not how it plays out.

Suppliers absorb freight increases, packaging changes, and promotional discounts — all in the name of partnership. Meanwhile, average net margins in Australian FMCG hover below 5% in many categories. Some, especially in private-label or chilled goods, are significantly lower.

If you're constantly renegotiating, discounting, and funding promotional calendars to stay on shelf — you're not in a partnership. You're in a hostage situation with quarterly reviews.

And the worst part?
Most leadership teams can’t afford to walk away — and the customer knows it.


Commercial Blind Spots: How Did We Let It Get This Far?

It usually starts innocently. One major account grows, fast. The ops team scales up. Forecasts look strong. Then the volume dips. Forecasts aren’t met. But by then, too much infrastructure, headcount and internal process are built around a single customer.

So you make the classic trade-offs:

  • You hold off on new channel development.

  • You delay diversification.

  • You keep servicing at full cost — for diminishing returns.

The account grows riskier with every passing quarter. But no one wants to put their hand up and say:
“We’re overexposed. We built the business around a single buyer. And now we’re stuck.”


How Businesses Get Trapped — And What the Alternative Looks Like

The deeper question is: how are businesses ending up in this position to begin with?

It’s not usually poor strategy. It’s the seduction of fast volume. A major retailer comes in with a large forecast, national exposure, and prestige. Execs say yes. Operations scale. Sales teams build pipelines around that one account. It becomes the centre of gravity for the entire business.

And by the time volume doesn’t meet forecast, the machine is already too big to pivot. Warehousing, labour, production schedules — everything is now calibrated to serve one customer.

But what’s the alternative?

The most resilient FMCG brands in Australia are the ones who build multi-channel portfolios from day one. That means:

  • Diversifying into DTC, foodservice, or independents, even when it’s slow to scale.

  • Prioritising cost-to-serve data so every account’s profitability is clear — not just revenue.

  • Rewarding commercial teams for profitable growth, not just top-line expansion.

  • Investing in longer-term resilience, even if it means slower growth upfront.

This approach doesn’t grab headlines. But it builds optionality. It gives leaders the power to say no. And that, ultimately, is how you get out of the trap.


The Denial Loop: Why Leadership Doesn’t Act Sooner

So why don’t businesses pivot faster?

Because the consequences of admitting overdependence are immediate — cost cuts, tough board conversations, sometimes job losses.

Admitting the issue feels riskier than managing the decline.

Boards often get sugar-coated updates about “strong relationships” and “opportunities in the pipeline.” Meanwhile, account managers know that POs are getting shorter, shelf space is shrinking, and payment terms are stretching. But no one wants to be the bearer of bad news.

The loyalty to that one big customer becomes a form of inertia.


What Brave Commercial Leadership Looks Like

Fixing this doesn’t mean severing key accounts. It means reassessing risk and rebuilding margin discipline — even if it’s painful in the short term.

Here’s what commercial bravery looks like in this context:

  • Modelling account risk exposure: What happens if your top customer halves their orders tomorrow? What if payment terms stretch to 120 days?

  • Redefining your internal narrative: Stop calling a margin-eroding customer a “partner.” Start calling it what it is — a risk.

  • Rebalancing your portfolio: Incentivise sales teams to win new channels, even at lower volume. Diversification is margin insurance.

  • Rebuilding cost-to-serve models: Know exactly what it costs to service each account — down to logistics, chargebacks, and admin drag.

This is what commercial leadership must look like in 2025.


The Silent Crisis in Mid-Market FMCG

This isn't just a one-off case study. It's a pattern playing out across Australia’s mid-market FMCG and manufacturing base.

KPMG’s 2024 disruption report found that 52% of private companies list supply chain disruptions and over-dependence on external suppliers or customers as key threats to growth — but only 43% are actively addressing it.

It’s not a strategic issue. It’s a leadership one. And it’s playing out in boardrooms right now.


What’s at Stake?

Everything.

If your business is too dependent on one customer, you’re not in control of your own future. One category review, one change in buyer, one corporate acquisition — and your volume is gone overnight.

Commercial leadership isn’t about maintaining the status quo. It’s about having the courage to act before the numbers force your hand. So ask yourself:

  • Where are we quietly overexposed?

  • What have we built our business around that’s now becoming a liability?

  • And do we have the courage to change it — before the market makes that decision for us?


This isn’t just about one customer. It’s about the future shape of your business.
And the longer you avoid the truth, the more power you give away.

A group of business people are walking in front of a city skyline.
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You don’t hear about it on the nightly news. There’s no breaking story. No panic. No protests. Just rows of vegetables being pulled out of the ground with no plan to replant. Just farmers who no longer believe there’s a future for them here. Just quiet decisions — to sell, to walk away, to stop. And if you ask around the industry, they’ll tell you the same thing: It’s not just one bad season. It’s a slow death by a thousand margins. 1 in 3 growers are preparing to leaveIn September 2024, AUSVEG released a national sentiment report with a statistic that should have set off alarms in every capital city: 34% of Australian vegetable growers were considering exiting the industry in the next 12 months. Another one-third said they’d leave if offered a fair price for their farm. Source: AUSVEG Industry Sentiment Report 2024 (PDF) These aren’t abstract hypotheticals. These are real decisions, already in motion. For many, it’s not about profitability anymore, it’s about survival. This isn’t burnout. It’s entrapment. Behind the numbers are people whose entire identity is tied to a profession that no longer feeds them. Many are asset-rich but cash-poor. They own the land. But the land owns them back. Selling means walking away from decades of history. Staying means bleeding capital, month by month, in a system where working harder delivers less. Every year, input costs rise, fuel, fertiliser, compliance. But the farmgate price doesn’t move. Or worse, it drops. Retail World Magazine reports that even though national vegetable production increased 3% in 2023–24, the total farmgate value fell by $140 million. Growers produced more and earned less. That’s not a market. That’s a trap. What no one wants to say aloud The truth is this: many growers are only staying because they can’t leave. If you’re deep in debt, if your farm is tied to multi-generational ownership, if you’ve invested everything in equipment, infrastructure, or land access, walking away isn’t easy. It’s a last resort. So instead, you stay. You cut your hours. Delay maintenance. Avoid upgrades. Cancel the next round of planting. You wait for something to shift, interest rates, weather, prices and you pretend that waiting is strategy. According to the latest fruitnet.com survey, over 50% of vegetable growers say they’re financially worse off than a year ago. And nearly 40% expect conditions to deteriorate further. This isn’t about optimism or resilience. It’s about dignity and the quiet erosion of it. Supermarkets won’t save them, and they never planned to In the current model, supermarket pricing doesn’t reflect real-world farm economics. Retailers demand year-round consistency, aesthetic perfection, and lower prices. They don’t absorb rising input costs, they externalise them. They offer promotions funded not by their marketing budgets, but by the growers’ margins. Farmers take the risk. Retailers take the profit. And because the power imbalance is so deeply entrenched, there’s no real negotiation, just quiet coercion dressed up as "category planning." Let’s talk about what’s actually broken This isn’t just a market failure. It’s a policy failure. Australia’s horticulture system has been built on: Decades of deregulated wholesale markets Lack of collective bargaining power for growers Retailer consolidation that has created a virtual duopoly Export-focused incentives that bypass smaller domestic producers There’s no meaningful floor price for key produce lines. No national enforcement of fair dealing. No public database that links supermarket shelf price to farmgate return. Which means growers, like James, can be driven into loss-making supply contracts without ever seeing the true economics of their product downstream. But the real silence? It’s from consumers. Here’s what no one wants to admit: We say we care about “buying local.” We say we value the farmer’s role. We share those viral posts about strawberries going unsold or milk prices being unfair. And then we complain about a $4 lettuce. We opt for the cheapest bag of carrots. We walk past the "imperfect" produce bin. We frown at the cost of organic and click “Add to Cart” on whatever’s half price. We’re not just bystanders. We’re part of the equation. What happens when the growers go? At first, very little. Supermarkets will find substitutes. Importers will fill gaps. Large agribusinesses will expand into spaces vacated by smaller players. Prices will stay low, until they don’t. But over time, we’ll notice: Produce that travels further and lasts less. Fewer independent growers at farmer’s markets. Entire regions losing their growing identity. National food security becoming a campaign promise instead of a reality. And when the climate throws something serious at us, drought, flood, global supply shock, we’ll realise how little resilience we’ve preserved. So what do we do? We start by telling the truth. Australia is not food secure. Not if 1 in 3 growers are planning to exit. The market isn’t working. Not when prices rise at the shelf and fall at the farmgate. The solution isn’t scale. It’s fairness, visibility, and rebalancing power. That means: Mandating cost-reflective contracts between retailers and suppliers Enabling collective bargaining rights for growers Building transparent data systems linking production costs to consumer prices Introducing transition finance for smaller producers navigating reform and climate pressure And holding supermarkets publicly accountable for margin extraction But more than anything, it means recognising what we’re losing, before it's gone. Final word If you ate a vegetable today, it likely came from someone who’s considered giving up in the past year. Not because they don’t care. But because caring doesn’t pay. This isn’t about nostalgia. It’s about sovereignty, over what we eat, how we grow it, and who gets to stay in the system.  Because the next time you see rows of green stretching to the horizon, you might want to ask: How many of these fields are already planning their last harvest?