Grocers call for controls on duopoly

21 Apr, 2015 05:40 AM
Our goal in the coming months is to take our case to the community of Australia

THE government should show "genuine leadership" by taking on the supermarket duopoly to make it more difficult for large companies to crush smaller ones, independent grocers and liquor retailers say.

A recent review into competition policy recommended the government ban companies with a substantial degree of power from engaging in conduct that would or would likely have the effect of substantially lessening competition.

The country's biggest supermarkets, Woolworths and Coles, have argued that introducing a so-called 'effects test' would increase prices for shoppers due to rising compliance and legal costs.

But Master Grocers Australia and Liquor Retailers Australia (MGA/LRA), representing the $14 billion independent grocery and retail sectors, said: "The battle to change the competition laws will be hard fought. Two of Australia's biggest and wealthiest conglomerates don't want it.

"We believe this is an area where the federal government can show genuine leadership - to give the little guy the ability to grow their business and to create jobs. It can also send a clear message that the government is backing smaller operators to have a go.

"Our goal in the coming months is to take our case to the community of Australia and to the decision-makers of Canberra and to convince them that change is urgent, that the time to act is now."

'Plenty of opportunity': Coles

Coles managing director John Durkan has played down the prospect of slower growth at Coles in the face of increased scrutiny of its dealings with suppliers, which have experienced lowered margins - and a major court win - in recent years.

Coles in December agreed to pay $10 million in penalties and to review contracts with suppliers after admitting to unconscionable conduct against eight of them.

But Mr Durkan said last week that "for all the talk that there are only two operators in Australia, there are plenty of people operating in the retail sector in Australia, so there's plenty of opportunity for everyone".

Woolworths and Coles have experienced deflation since the second half of calendar 2011. Responding to disappointing grocery sales and an improving Coles, Woolworths has announced it will spend $500 million on cutting prices, improving stores and increasing staffing.

The country's No.1 supermarket has also scrapped the slight premium it charged for online buys versus in-store purchases.

Broker Macquarie has estimated that Woolworths was about 2.3 per cent cheaper than Coles at the end of the March, based on a basket of items such as fruit and vegetables, meat, bread and dairy.

But the MGA/LRA recently released a survey showing only 22pc of respondents said the level of competition in the grocery market was "healthy", and 90pc wanted their local independent supermarket, liquor stores and hardware stores to survive. The survey was of 1000 respondents to an online survey plus six focus groups with 20 people each.

The industry groups say two other recommendations from the competition review - deregulating retail trading hours and allowing supermarkets to sell prescription medications - would further entrench the big two's power. "Taking away (independent retailers') ability to trade on days when their larger competitors are closed ... will ultimately have a detrimental effect on their survival," said Jos de Bruin, MGA chief executive.

And allowing supermarkets to sell prescription medication would "commoditise pharmaceuticals and can only, as we have seen in other industry sectors, lead to two very large conglomerates dominating yet another retail sector in Australia", Mr de Bruin said.

The year-long Harper review made six recommendations on retail, including allowing supermarkets to sell alcohol in-store, and deregulating planning and zoning laws.

Grocery wholesaler Metcash and German discount supermarket chain Aldi have refused to comment on the report.

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21/04/2015 6:45:35 AM

Local independents are a nice sound bite but they are not going to put the heat on Coleworths. Only Aldi can do that and the key to their expansion is the availability of sites for new stores. Coleworths have been tying up potential sites to deny them to competitors: governments need to apply a use-it-or-lose-it pressure.
21/04/2015 7:27:54 AM

typical aussie attitude, if they are big and successful lets cut them down even if they do employ many people and do a lot for community groups and charities.
21/04/2015 10:29:51 AM

Oh dear. The law of unintended consequences is never far away. If you think that Coles and Woolies are a problem, wait until Aldi gets going, as globally it is of course a gorilla and your independents will be the first to squeal at their ruthless discounting. Meantime it is also German owned, so profits won't go to your super fund, as with ColesWorth. Aussies just love to shoot themselves in the proverbial foot and then complain when it hurts!
22/04/2015 7:58:33 AM

I run a small supermarket in a rural town NSW. I have an account with Coca Cola when I buy 24 pack coke cans from coca cola they cost me $30 yet you and I can buy them from woolies and coles for retail of $17. Woolies coles probably buy them for about $12. Is that fair? I can buy by the pallet in Sydney so freight is not the main factor. After countless arguments with Coke I still pay $30. That's just one of the reasons I cannot compete with woolies/coles.
Bushfire Blonde
22/04/2015 6:41:01 PM

The Grocers are calling for it, the Liquor Retailers are calling for it, the Butchers are calling for it, the Service Station Operators are calling for, the Farmers are calling for it - when is the Federal Government going to break up this monopoly? Look out Canberra, you might get the same treatment that the LNP Government got in Qld.
23/04/2015 9:58:28 AM

There is no duopoly. The sharemarket understands this, others are just a bit slow. Woolies are already being devalued by the reality of Aldi and their near 400 stores and growing, out-discounting all the rest. That extra competition will be a far bigger threat to the small store then any competition which existed before.
Bushfire Blonde
24/04/2015 12:09:32 PM

Yes Kanzi, I was quite wrong - now there is a triopoly - what is Canberra going to do about how it treats the smaller businesses?


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