The Australian Competition And Consumer Commission (ACCC) is investigating the grocery industry because despite low inflation grocery food prices have increased at a significantly higher rate than the headline inflation rate. The inquiry is expected to last 4 months, but will the whole story be told?
ARE all parties Getting A Fair Deal?
All aspects of the supply chain, including the nature of the competition at the supply, wholesale and retail levels will be considered. The Australian reported that:
“Doing business as a grocery retailer in Australia is more difficult than anywhere else in the world because of the way Woolworths and Coles dominate the sales and shop sites…South African managing director of supermarket chain Franklins, Aubrey Zelinski…said the way Woolworths and Coles exercised their market muscle made it difficult for other businesses to break into the market.
The cost to do business in Australia is more difficult than anywhere else in the world…
Smaller supermarket chains in competition with the “big boys” struggled to obtain retail sites and faced excessive red tape and delays awaiting approval for development applications…
Grocery prices were clearly outstripping inflation and the grocery sector was an area that was ‘long overdue in terms of reform’.”
Suppliers Fearful Of Speaking Up About Supermarket Pricing Practices
The Age reported that many companies will give evidence in private, to protect commercially-sensitive information. Most supermarket suppliers appearing before the commission — including Ingham Enterprises, Nestle and Arnotts Biscuits — are not giving evidence voluntarily, but have been summonsed by the ACCC under its trade practices powers.
“It Can Not Be Just A talk Fest”
These are the words of Choice chief executive Peter Kellas he called for a cap on the market share held by Coles and Woolworths, saying that they already controlled about 80% of the market for processed grocery goods and should not be allowed to expand further. He called for a separate index for inflation in grocery prices, and for supermarket items such as milk and cereal to be priced by weight so consumers could easily compare prices.
“It will be very important for the ACCC to deliver real results from this inquiry.”
Australian National Retailers Association chief executive Margy Osmond said Coles and Woolworths only controlled about 50% of the market and a market cap would “destroy competition, not promote it”.
The Affect On Dairy Farmers
NSW dairy farmer Lynne Strong said a lack of supermarket competition was affecting farmers. In one of just three public sessions yesterday, she said farmers were forced into exclusive contracts with processors such as Dairy Farmers and National Foods, which meant they could not sell their milk to other processors even if there were shortages and they were offered higher prices elsewhere.
High Retail Prices – Low Grower Returns
The Victorian Farmers Federation (VFF) submission states that over the last 12 months:
- vegetable prices have risen 21.5%
- cheese 8.5%
- bread 7.9%
- milk 5%
Growers tell the VFF vegetable farm gate prices have risen 120%. A grower sells lettuces at $1.00 – 1.50 but retails at around $2.70; parsnips rise from $50 per 10kg box to $9.99 per kg, equivalent to $100 per 10kg. The price of bread has risen up to 70 cents but only 14% is attributable to higher grain prices, the rest goes to marketers, flour millers, bakers and transport.
I think we all want to know what REALLY goes on and the secrecy element is worrying.