Home » Coles and Woolies expansion moves could hurt consumers

Coles and Woolies expansion moves could hurt consumers

“Additional supermarket competition is needed in the Australian market to not only create consumer benefits of choice, innovation and competitive prices, but to also reduce risks for suppliers and keep manufacturing jobs in Australia.”

The inquiry, chaired by Greens senator Nick McKim, is considering the pricing practices of Coles and Woolies, as well as other players in Australia’s grocery sector.

The chief executives of the two supermarket giants are due to give evidence on Tuesdayin Canberra, after suppliers, unions and former ACCC chairman Allan Fels address the inquiry.

Warning of “a significant imbalance in negotiating power between the major supermarkets and their suppliers,” the council said suppliers often derive major parts of their revenue from the supermarkets, but represent only a tiny fraction of the revenue of major players such as Coles or Woolworths.

The council pointed to the failed attempt by German supermarket brand Kaufland to enter the Australian market in 2020. The company left after investing more than $500 million.

“Kaufland’s decision to not enter the Australian market warrants investigation to understand the barriers they faced and what policy levers could encourage additional competition,” the council said.

Economist and former Labor minister Craig Emerson will give evidence to the inquiry about his review of the Food and Grocery Code of Conduct, which recommended moving to a mandatory model with hefty fines for misuse of market power.

Woolworths used the interim recommendations to call for the code to be expanded to cover rivals Amazon, Costco, Chemist Warehouse and Bunnings, saying their businesses were increasingly used for essentials otherwise purchased at supermarkets.

Woolworths said Costco and Amazon had global revenues “many times the size of Australian supermarkets” and should be included in the beefed up rules.

Aldi chief executive Anna McGrath this week told the inquiry planning laws and supply chain capacity constraints are holding back the discount chain from further expanding in Australia, prompting calls for state and local regulations to be considered as part of competition reform.