Coles and Woollies wiping out regional grocers: lobby group

The Senate Inquiry into Coles and Woolworths’ anti-competitive behaviour is not impacting their mission to take over the grocery sector entirely, and the independents are desperately calling on the federal government to step in.

The independents are banding together to create a lobby campaign group over plans for the big two to increase floor space by over 5 per cent in the next few years.

Coles and Woolworths have undertaken research and development over the last few years which has seen them close dozens of stores and reopen them in other areas.

These areas, the independents say, are usually where they are located.

A local IGA or smaller grocer is then pushed out of business as they find it impossible to compete with the ridiculously low prices the major supermarkets can achieve through their anti-competitive and bullying behaviour.

The Senate Inquiry into the actions of Coles and Woolworths is struggling to get people who will comment on the behaviour of the big two, while factories continue to close and more private label products spring up on shelves.

Last week, Steven Strachan, the outgoing chief executive of the Australian Winemakers Federation, who would only speak once he had left the position, for fear of the consequences if he spoke out earlier, said the major supermarkets are bullying the winemakers too.

''If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry,'' Strachan said

''Whenever I've made comments in the press, I could only talk about retailers in a generic sense, but they [Coles and Woolworths] would religiously follow up on those comments and make it known they were displeased.

The pressure placed on food producers is well-known to everyone in the industry – Food Magazine has spoken to countless manufacturers about the pressures placed on them by Coles and Woolworths, but none will speak on the record – and they have even been accused of contributing to road deaths with unrealistic delivery demands.

A Commonwealth Bank assessment of Woolworths' $1-billion-a-year growth plan, which will see it swoop into more regional centres, including West Dubbo, Ulladulla and Morriset, found the huge supermarkets being developed are too big for the areas.

''Many of the Woolworths developments have been in areas with marginal medium-term economics for supermarkets,'' the Commonwealth Bank analysis said.

''We are concerned that in addition to the poor lending conditions, Woolworths is not helping itself by developing marginal sites.''

The report questioned Woolworths’ ''exceptionally high'' forecast floorspace growth of 3 per cent a year.

Master Grocers Australia, which lobbies on behalf of independents IGA and Foodworks, will use the bank assessment to support its claim that the big two are opening bigger stores than necessary to wipe out the competition.

''Master Grocers Australia believes the strategy is conscious, deliberate and intended to bring about a substantial lessening of competition in those local markets where over-large stores are developed,'' a draft report said, according to The Age.

Master Grocers will use the findings to lobby the federal government and Australian Consumer and Competition Commission (ACCC), calling for more action to stop the inundation of Coles and Woolworths’ around the country.

It wants MPs and the ACCC to use their powers to probably investigate and assess the profitability of such stores, push for mandatory competition and net community benefit tests in planning stages prior to approval and also legislate that prior notice of proposed property acquisitions by the major chains must be provided.

Coles spokesman Jon Church told The Sydney Morning Herald the claims are ''nice conspiracy theory with no basis in fact''.

''We only open stores where there is a consumer need and we believe we can make a return on our investment,'' he said.

And it’s not just the grocery market the big two are wiping out, they also plan to bring the liquor, hardware, office supplies and gaming, arms of their businesses to “marginal” areas.  

''The effect is the elimination of competition in these local markets,'' the report said.

Master Grocers has identified a number of stores which it says are “oversized,” including a 2383 metre square Woolworths store and liquor outlet in Bright, which has a population of 2100.

There is also a proposed 3100 metre square Woolworths store in Seville, where the population is 1800 and a 2600 square metre store which has opened in Koo Wee Rup, where there is only 2803 people living.

Woolworths spokeswoman Clare Buchanan told The Sydney Morning Herald that the company's competitors would not know the potential profitability of individual stores, but she did admit the company looks to open new stores in growth areas

''Developers look to incorporate amenities such as supermarkets in order to attract people to live in an area,” she said.

“This means we commit to a long-term investment in the future growth potential of a suburb.''

Here at Food Magazine, we've been asking whether we need a Royal Commission into the behaviour of the major supermarkets. Do you think it's come to that?

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