According to the ACCC, there is a small chance of a big chain making a big splash in Australia, and it recommends that smaller players give more support.
The much-anticipated report from the ACCC survey of Australian supermarkets was released on Competition Watchdog, concluded that Coles, Woolworths and Aldi are one of the most profitable chains in the world.
At the same time, amid many discoveries, Australia’s Competitive Consumer Commission (ACCC) said it would be difficult for new, large competitors to enter the market.
ACCC said the average product margin for the three measures has increased over the past five fiscal years, resulting in “bad” results for consumers and suppliers.
“For the past 12 months, the ACCC has responded to consumer surveys, received over 100 public submissions, held roundtables of eight suppliers, reviewed tens of thousands of internal documents, conducted private hearings and 10-day hearings, analyzed billions of points in supermarkets, and analyzed Chairman Mick Keogh.
The detailed report focuses on 20 recommendations for improving competition within the sector.
ACCC proposes a state-backed community store
ACCC also proposed government support for community-owned stores in remote areas that have high running costs, mandatory disclosure of customer pricing information, and changes to zoning regulations that allow for more commercial development in supermarkets.
The report also cites Aldi’s 20-year journey to secure just 9% of the Australian market, saying it is difficult for a larger chain to enter. At the same time, Metcash’s IGA is closing its stores.
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The ACCC said that the possibility of simplifying programming and zoning methods is small for existing players and could help strengthen merger laws.
Since 2019, the two supermarket giants have acquired around 260 retail sites, but only 14 have been notified to the ACCC.
Clearer pricing to deal with “reduced”
The report notes that while consumers are increasingly prioritizing convenience, price-conscious shoppers focus on comparing costs.
An important concern raised by consumers during the investigation was the lack of transparency regarding price increases, particularly the practice of “reducing”.
This occurs when the size of the product decreases while the price remains the same or rises.
To address this, the ACCC recommends that supermarkets need to notify consumers when a reduction occurs. This was addressed by displaying “per unit” prices to break down the prices.
“This information should be displayed at least close to product tickets on the shelves and product webpages,” the report said.
Coles says inflation boosts electricity, rent and wages
Coles and Woolworths respond to ACCC supermarket surveys and defend their pricing strategy while acknowledging the need for greater transparency.
When contacted by the Epoch Times, a Coles spokesperson said the Australian grocery division is “very competitive and evolving rapidly,” and said the company faces increased competition with Aldi, Costco, Amazon and independent retailers.
“Customers are increasingly cross-shopping and splitting grocery spending. So Coles has to compete fiercely for consumers’ groceries basket share,” the spokesman said.
Coles added that rising grocery prices are driven by increased operating costs such as electricity, rent, wages and transportation.
“We don’t control these inflation costs, but we’re contributing to rising grocery prices,” the spokesman said.
The supermarket chain also noted that the net profit margin has remained stable at 2.6% over the past five years. That means you make around $2.60 for every $100 for under $100.
Coles welcomed the ACCC recommendations to improve transparency, but warned against measures that could “increase red tape and increase costs.”
Woolworths outlines current initiatives
Woolworths also acknowledged the ACCC findings, saying many of the recommendations follow the procedures the company has already taken.
“We worked constructively with the ACCC to help us understand the business, the operational sector, the suppliers and supply chains and the considerable competition we face,” Woolworth Group CEO Amanda Birdwell said in a statement.
We outlined recent initiatives, including clearer price transparency, the launch of a new watchlist tool for specials, and an increase in affordable private label products.
“Customers fully understand that they want to make it easier for them to find value, especially as cost of living is their primary concern,” Birdwell added.
Chalmers supports ACCC’s call for action
Treasurer Jim Chalmers welcomed the ACCC Report and reaffirmed the government’s commitment to tackling the superiority of supermarkets.
He emphasized that the government is already acting on several recommendations, including making food and food codes mandatory, providing funding to the ACCC, and working with the states and territories to ease new competitor zoning laws.
“We’re reforming the pricing code for units, and it’s about the mean “reducing” that drives people crazy. We are working with states and territories on planning and zoning to make it easier for new competitors to compete with Coles and Woolworths,” Chalmers said.
The treasurer also highlighted the government’s efforts to fund the supplier group, giving them more power in negotiations with the supermarket giant.
“This is all about cracking down on supermarkets,” he added.
Farmers Back Report
National Farmers’ Federation (NFF) also welcomed the final report on ACCC’s supermarket inquiry.
NFF President David Jochinke said, “The fact that the majority of the 20 recommendations in the report focus on fresh produce supply chains indicates that our concerns are valid.”
Jochinke highlighted that the findings in the report confirm long-standing concerns from producers regarding the supermarket market power.
“Though there has been two years of debate about the market power of supermarkets, this independent report provides a clear confirmation. Fresh produce suppliers face serious and real challenges,” he said.
