In the realm of Australian retail, a storm is brewing as the Australian Competition and Consumer Commission (ACCC) prepares to launch a public inquiry into the practices of supermarket giants Woolworths and Coles. Scheduled for November, this inquiry follows the release of a comprehensive interim report that paints a troubling picture of consumer trust erosion and competitive fairness within the grocery sector.
The ACCC’s 265-page report, unveiled on September 27, classifies Woolworths and Coles as pivotal players in what it describes as an “oligopoly.” This assertion is underscored by the staggering statistic that these two companies dominate a whopping 67% of the country’s supermarket retail sales. In stark contrast, Aldi holds a mere 9% market share, while independent supermarkets backed by Metcash account for about 7%. This concentration of market power raises significant concerns about consumer choice and pricing practices.
In recent years, consumer sentiment has shifted dramatically. Almost half of those surveyed now express skepticism about the credibility of supermarket pricing, a notable increase from just 17% in 2008. ACCC Deputy Chair Mick Keogh noted that the loss of trust stems largely from perceived deceptive pricing strategies, such as misleading discount claims and loyalty program penalties. This sentiment is echoed by Prime Minister Anthony Albanese, who emphasized the need for fairness in pricing, stating, “Customers don’t deserve to be treated as fools by the supermarkets. They deserve better than that.”
The interim report also highlights troubling aspects of supermarket practices, such as the introduction of member-only pricing, which many consumers view as a coercive tactic to encourage loyalty program participation. “With the introduction of member-only pricing, some consumers may feel they have no option but to participate in loyalty programs,” Keogh observed, reflecting widespread concerns over data privacy and transparency.
The ACCC’s inquiry will delve deeper into these issues, with a particular focus on 14 staple products, including meat, dairy, and fresh produce, that are central to Australian household spending. This detailed examination aims to shed light on pricing practices that have left many consumers feeling exploited.
Moreover, the report sheds light on the challenges faced by suppliers, who claim that the overwhelming market dominance of Woolworths and Coles has severely restricted their negotiating power. Suppliers have reported being compelled to pay rebates for promotions, adhere to costly packaging requirements, and comply with stringent quality standards—all of which inflate their operational costs and diminish profit margins.
The situation is further complicated by market entry barriers that prevent new players from establishing a foothold. The ACCC’s findings indicate that planning and zoning laws are significant impediments, often leading to “land banking,” where prime retail locations are held by existing players for extended periods. Woolworths, for instance, has interests in 110 undeveloped sites, while Coles controls 42. In contrast, Aldi has only 13 sites earmarked for future development. This disparity raises pertinent questions about the competitive landscape and the viability of new entrants in the sector.
As the inquiry approaches, the ACCC remains committed to scrutinizing not only the pricing practices of these supermarket giants but also their impact on suppliers and market dynamics. With the final report set for release in February 2025, stakeholders eagerly anticipate recommendations that could reshape the future of grocery retail in Australia.
In a landscape where consumers are increasingly vigilant and suppliers are advocating for more equitable treatment, the inquiry represents a crucial step toward restoring trust and fostering a more competitive marketplace. As Assistant Minister for Competition Andrew Leigh aptly noted, enhancing competition is vital for driving productivity and ultimately benefiting consumers facing rising cost-of-living pressures. The outcome of this inquiry could very well dictate the future trajectory of Australian supermarkets and their relationship with both consumers and suppliers alike.
