Australian watchdog puts Coles and Woolworths on notice
Rod Sims, the incoming chairman of the Australian Competition and Consumer Commission (ACCC), made these comments in his is first address to the Melbourne Press Club, where he put both Coles and Woolworths on notice.
“The two major supermarkets have significant market power, with many smaller suppliers feeling they lack a real ability to negotiate supply arrangements. The ACCC can and will watch closely to ensure any such dealings do not involve unconscionable conduct by the supermarkets,” said Sims.
“To give another example, supermarkets sell both branded and their own private label products. This vertical integration in the supply chain needs close scrutiny to ensure the supermarkets do not misuse their market power under Section 46,” he continued.
Coles and Woolworths have been in a price war since January this year, starting with the two retailers slashing the price of their own brand milks, placing further pressure on branded suppliers who complained of being squeezed out of their margins.
FoodNavigator-Asia contacted both Coles and Woolworths over the issue, but the two companies redirected queries to the Australian National Retailers Association (ANRA) in this regard.
Grocery supply chain
ANRA policy manager Russell Goss told this publication that the association does not believe the comments by Sims equated to a view that the ACCC believes there is a duopoly in Australia’s grocery industry.
“We understand that the ACCC will continue to do its job in monitoring the conduct of businesses, with particular reference to section 46 of the Competition and Consumer Act 2010,” he said.
Goss pointed out that the supermarket industry was the subject of an extensive ACCC inquiry in the past in 2008, with regards to the competitiveness of retail prices for standard groceries.
“Amongst the ACCC’s findings were that grocery retailing is workably competitive, and that it not identify anything that is fundamentally wrong with the grocery supply chain,” he said.
Long-standing concerns about supermarket power
Concerns that the two supermarkets are wielding too much power against food processors have been growing over the past year.
Dr David McKinna, founder and director of Victoria-based food industry consultancy Strategic Insights, told this publication in August that the dominant position of Coles and Woolworths (the top two Australian food retailers) was putting pressure on food processors’ margins.
“The ramping up of private label programmes by the major supermarkets is creating intense competition and devaluing categories, i.e. volume is growing but value is declining,” said McKinna.
Heinz's CFO and executive vice president Arthur Winkleback also singled out Australian retailers, during a recent earnings call, claiming they were squeezing the company's margins.
