Coles Group (ASX: COL) faces private-label scrutiny after ABC tomato paste forensic testing

Coles Group Limited (ASX: COL) is defending the integrity of its private-label supply chain after an Australian Broadcasting Corporation (ABC) investigation used forensic origin testing to allege that a Coles-brand Italian tomato paste, alongside Aldi Australia’s Remano home brand and the majority of Leggo’s tomato paste products, contained material traced back to China rather than the countries printed on the label. The Australian Broadcasting Corporation reported that Source Certain, the Australian origin-verification laboratory that also conducted the 2024 BBC Panorama Xinjiang tomato investigation, cited accuracy above 98% across more than 900 samples covering 221 products from 39 brands. Coles Group, Simplot Australia (the owner of Leggo’s) and Aldi Australia disputed the findings. Woolworths Group Limited (ASX: WOW) private-label products, along with the Italian family-owned Mutti brand, passed the same country-of-origin test. The unresolved question is not whether a single tomato paste line survives the news cycle, but whether the Coles Group private-label sourcing model can absorb a Modern Slavery Act 2018 overlay, a regulator-level country-of-origin follow-up and a rival that has just been handed a traceability marketing gift, without compressing the margin advantage that makes private label the fastest-growing part of the shelf.

What did Source Certain’s forensic testing actually find in the ABC News Australia investigation of Australian tomato products?

The Australian Broadcasting Corporation reported that Source Certain analysed more than 900 samples across 221 products from 39 brands using stable isotope ratio analysis and trace element analysis, the same techniques that supported the BBC Panorama and Business and Human Rights Resource Centre findings in the United Kingdom in late 2024. Source Certain, based in Western Australia, described the technique as accurate above 98%. According to the Australian Broadcasting Corporation, the majority of Leggo’s tomato paste products carried labels inconsistent with the geographic isotopic signature the laboratory identified, and Coles-brand Italian tomato paste and Aldi Australia’s Remano home brand were similarly flagged. Some samples were traced to the Xinjiang region, banned by the United States Customs and Border Protection under the Uyghur Forced Labor Prevention Act in 2021 over documented forced-labour concerns. The Australian Broadcasting Corporation report also confirmed that Woolworths Group private-label products and Italian family-owned Mutti passed the same testing regime.

Aldi Australia rejected the claims and pointed to supplier traceability documentation as evidence of compliance. Coles Group and Simplot Australia disputed the findings to the Australian Broadcasting Corporation. That posture is consistent with how Tesco, Asda, Waitrose and Morrisons responded to the BBC Panorama investigation in December 2024, when the UK grocers argued they had conducted their own stable isotope ratio analysis and trace element analysis and stood by their own-brand supply chains. None of the UK grocers have publicly reversed their position, but retailer response and forensic-laboratory result rarely resolve inside the news cycle.

Why does the Coles private-label brand exposure matter more than the Aldi and Leggo’s response cycle?

Coles Group is the only listed Australian name directly implicated in the Australian Broadcasting Corporation investigation. Aldi Australia is part of the privately owned Aldi Sud group, and Simplot Australia is a subsidiary of the privately held United States conglomerate J.R. Simplot Company. That asymmetry matters because the reputational cost of the Australian Broadcasting Corporation report converts into share-price sensitivity only at Coles Group and, indirectly and favourably, at Woolworths Group.

Private-label penetration is not a peripheral part of the Coles Group model. It is a structural margin lever. Home-brand products carry higher gross margins than branded equivalents, and their expansion has been central to how Coles Group has defended earnings during the current cost-of-living cycle. A traceability event that questions the credibility of the Coles-brand label sits directly on the part of the business that has been earning the incremental margin. It also sits inside a Country of Origin Food Labelling Information Standard 2016 regime that gives the Australian Competition and Consumer Commission and state fair-trading agencies enforcement scope well beyond a reputational hit.

How does the Xinjiang forced-labour angle collide with Australia’s Modern Slavery Act reporting regime?

The Modern Slavery Act 2018 requires large Australian retailers to publish annual statements identifying modern slavery risks in their supply chains and describing the actions taken to mitigate those risks. Coles Group, Woolworths Group and Aldi Australia all file Modern Slavery Act statements, and the Attorney-General’s Department maintains a public register of those statements. A Source Certain result that alleges Xinjiang-origin material moved through the private-label tomato paste supply chain would, if sustained, sit uncomfortably inside those statements.

The complicating factor is that the Australian regime does not yet mirror the United States Uyghur Forced Labor Prevention Act. The United States regime creates a rebuttable presumption of forced labour for any goods sourced from Xinjiang, and companies must produce clear and convincing evidence to overcome it. Australian law does not impose that presumption at the border, which is why the reputational lever, rather than a customs enforcement lever, is doing most of the work here. A parliamentary inquiry, a Border Force review or an expansion of the Modern Slavery Act reporting threshold would tighten that gap. Coles Group and Woolworths Group have both flagged supply-chain traceability investment in their sustainability disclosures. The Australian Broadcasting Corporation investigation gives whichever of them can demonstrate the more rigorous forensic testing programme a competitive advantage in the private-label category rather than merely a compliance requirement.

What does Woolworths Group passing origin testing mean for the private-label competitive dynamic against Coles?

The Australian Broadcasting Corporation reported that Woolworths Group private-label products passed country-of-origin testing under the same forensic methodology that flagged Coles Group and Aldi Australia. In a market where the two listed grocers are locked in continuous private-label share competition, that is a marketing asset Woolworths Group can convert quickly. Woolworths Group has been on the front foot in the H1 FY26 result on cost discipline and value-perception recovery, and its shares closed the week ended July 24, 2026 at A$39.18, up 0.67% on the day and within striking distance of the A$40.75 52-week high. Chief executive officer Amanda Bardwell has anchored the H1 FY26 message on value and execution, and a defensible traceability story on private label extends that narrative without requiring incremental capital.

The near-term risk for Coles Group is not a customer exodus. It is a slower run rate of new private-label launches while procurement, quality assurance and legal teams reprocess the tomato paste supplier base and reassess the isotope-testing evidence chain. Every week the story sits open, Woolworths Group has more room to lead on the private-label conversation, and Aldi Australia has less room to expand share on price alone. Independent grocer Metcash Limited (ASX: MTS), which supplies IGA and Foodland, was not named in the Australian Broadcasting Corporation report and could see peripheral share benefits in categories where consumers actively reject Xinjiang-linked supply chains.

Why is the ACCC misleading-pricing litigation the wrong lens for reading this new supply-chain story?

The Australian Competition and Consumer Commission’s Federal Court action against Coles Group and Woolworths Group over allegedly misleading “prices dropped” and “down, down” promotions has dominated the regulatory framing of the supermarket sector since September 2024, and both companies have defended those proceedings. The Australian Broadcasting Corporation tomato paste findings are a different vector. Where the Australian Competition and Consumer Commission action alleges misconduct on the pricing side of the shelf, the Australian Broadcasting Corporation investigation alleges misconduct on the origin-declaration side of the shelf. The two vectors are unrelated in law but reinforcing in narrative, because the underlying question for the consumer is the same: can the label on the product be trusted.

For investors, this means the discount that Coles Group is currently trading with relative to a clean traceability, clean pricing baseline may already be visible in the multiple. Coles Group closed intraday July 27, 2026 at A$23.45, up 0.09%, with a market capitalisation of A$31.60 billion, a price-earnings multiple of 31.08, an EPS of A$0.76, a 52-week range of A$20.10 to A$24.59 and a fully franked dividend yield of 3.11%. The stock is closer to the top of its range than the bottom. That leaves limited cushion for a further overhang, and the July 17, 2026 withdrawal from the Greencross Pet Wellness Company acquisition process, framed by the company as capital discipline, has removed one of the near-term growth optionalities that could have offset a private-label reputational drag.

How could country-of-origin labelling enforcement and regulator response reshape private-label sourcing economics?

If the Australian Competition and Consumer Commission or the Department of Agriculture, Fisheries and Forestry follow the Australian Broadcasting Corporation report with an independent country-of-origin verification exercise, the range of outcomes widens quickly. A confirmatory finding would trigger corrective advertising, product recalls at the retailer level and potential civil penalties under the Australian Consumer Law. A non-confirmatory finding, or one that sides with the retailer stable isotope ratio analysis rebuttal, would leave Source Certain and the Australian Broadcasting Corporation defending the methodology of the investigation itself, as happened during and after the BBC Panorama investigation.

Either outcome pushes the private-label sourcing economics in the same direction. Retailers will need to add more frequent, more expensive, more forensic-grade supplier auditing into the private-label cost base. That marginally erodes the margin advantage private label enjoys over branded product, unless the retailer can pass the cost back to the processor. For a private-label-heavy strategy, this is a small structural cost, not a one-off incident cost.

What does the Coles Group share-price context tell investors about how much risk is already being priced in?

Coles Group has recovered from an A$20.10 52-week low to trade within 5% of its A$24.59 52-week high. It carries a price-earnings multiple that is above its long-run average, supported by consistent dividend growth and an H1 FY25 print that delivered A$23.04 billion in sales (up 3.7%) and A$666 million in underlying net profit after tax (up 6.4%). Broker consensus has moved higher through the year, with Bell Potter’s most recent public price target at A$20.50 (a lag versus current market), Ord Minnett at A$19.50 (also lag versus current market) and multiple houses upgrading through the June and July windows on the value-perception recovery in Australian food retail. Business News Today did not identify a widely published current broker consensus that has yet formally incorporated the Australian Broadcasting Corporation supply-chain findings.

That gap between the recovery in the share price and the emerging supply-chain narrative is where the near-term risk lives. If the story broadens into a regulator response or a formal retailer product-withdrawal cycle, the recovery in the multiple is exposed to a re-rating that broker models have not yet reflected. If Coles Group can produce credible internal forensic testing that rebuts the Source Certain findings within the next reporting window, the current multiple can hold. The intermediate scenario, in which the story fades without formal resolution, is the most likely, and the least useful for the investor thesis.

What signals will separate a manageable brand incident from a structural private-label margin problem for Coles Group?

The first signal is whether Coles Group publishes an independent verification report on the flagged private-label lines within the next quarterly result window. The second signal is whether the Australian Competition and Consumer Commission or the Department of Agriculture, Fisheries and Forestry open an inquiry into country-of-origin labelling for imported processed tomato products. The third signal is whether Woolworths Group actively markets its clean result, which would compress Coles Group’s private-label share momentum. The fourth signal is whether Simplot Australia and other Coles Group private-label processors adjust their tomato paste sourcing, and whether that adjustment shows up in category shelf pricing over the next two to three quarters. The fifth signal is whether the Modern Slavery Act 2018 statements for 2026 filed by Coles Group and Woolworths Group carry materially different levels of forensic-testing disclosure.

What should investors track as Coles Group defends its private-label traceability against the ABC News Australia findings?

• Coles Group (ASX: COL) is the only listed Australian retailer whose private label was directly named in the Australian Broadcasting Corporation investigation, giving the story asymmetric share-price relevance versus the privately held Aldi Australia and Simplot Australia
• Source Certain’s forensic testing covered more than 900 samples across 221 products and 39 brands, and the same laboratory anchored the 2024 BBC Panorama Xinjiang tomato investigation that named Tesco, Asda, Waitrose and Morrisons
• Woolworths Group (ASX: WOW) private-label products and Italian family-owned Mutti passed the same testing regime, handing Woolworths Group a marketable traceability advantage in the private-label share contest
• Coles Group, Simplot Australia (the owner of Leggo’s) and Aldi Australia have all disputed the findings, which mirrors how UK grocers responded to the BBC Panorama investigation and rarely resolves inside a single news cycle
• Australia’s Modern Slavery Act 2018 reporting regime does not carry the United States Uyghur Forced Labor Prevention Act’s rebuttable presumption, which is why the reputational lever rather than a customs lever is doing the work
• Coles Group closed intraday July 27, 2026 at A$23.45, a market capitalisation of A$31.60 billion, a price-earnings multiple of 31.08, and within 5% of the 52-week high of A$24.59, leaving limited cushion for a further reputational overhang
• The overlay of an active Australian Competition and Consumer Commission Federal Court case on alleged misleading “prices dropped” promotions and a July 17, 2026 withdrawal from the Greencross Pet Wellness Company acquisition process compounds the near-term narrative pressure on Coles Group
• Business News Today did not identify a widely published current broker consensus that has yet formally incorporated the Australian Broadcasting Corporation supply-chain findings, which is where the intermediate re-rating risk sits
• The near-term test is whether Coles Group publishes independent verification of the flagged private-label tomato paste lines and whether the Australian Competition and Consumer Commission or the Department of Agriculture, Fisheries and Forestry open a country-of-origin labelling inquiry
• The medium-term test is whether private-label margin economics survive a permanent step-up in forensic supplier auditing costs, and whether Woolworths Group converts its clean result into measurable share gains at Coles Group’s expense