The representative body for smaller grocery retailers in Australia are again calling on fairer competition in the sector, releasing a report outlining the consequences if regulators and governments don’t step in.
Master Grocers Australia (MGA)’s report “Let’s Have Fair Competition,” says the independent supermarket industry is at risk of being annihilated by the unabated growth of the duopoly, Coles and Woolworths, according to an industry report.
They say unless the Australian Government and the Australian Competition and Consumer Commission (ACCC) take action now, Australians will have no competition in the sector, leading to prices increases and the end of freedom of choice.
The report refers to the enormous growth of the chains in the last decade and how their massive market power has resulted from practices such as anti-competitive price discrimination, store saturation strategies and shopper docket schemes.
“We want a ‘fair go’ for the smaller independents. It’s time to take action against this powerful Goliath that is growing stronger every day,” Jos de Bruin, chief executive of the MGA said.
“If the Regulators sit back and do nothing to foster fair competition in the grocery and liquor retail industry, then the Australian consumer will literally pay the price in the long term.”
Food manufacturers produce growers and farmers have been warning of the same problems for years, but have been forced into silence in recent years as the power of the duopoly means those who do voice their concerns are punished with reduced shelf space or non-renewal of contracts.
The MGA also wants state and local governments to strengthen retail assessment criteria to prevent the major supermarkets from building oversized outlets in small towns that push smaller retailers out of business.
“The independent supermarket industry strongly supports competition, but we want fair competition because without it, there will be no one left to challenge the big retailers and they will become even stronger.”
Earlier today Australia’s largest bread maker, Goodman Fielder admitted its $1 private label bread deal with Coles was unprofitable and unsustainable and managing director Chris Delaney admitted it was “not a good investment and I wouldn't do it again if I had a choice.”
Coles only response on the issue came in the form of a written statement that seemed somewhat threatening in its attitude towards cost absorptions and contracts.
"Coles is happy to review any supplier requests for cost price increases that can be appropriately validated,” the Coles spokesperson said.
In reponse to the MGA report, Coles told Food Magazine "Coles is not in the business of opening unprofitable stores as the Master Grocers Association report claims.
"We only open stores where we believe there is customer demand for our offer.
"Some other points that might be of interest in the debate are store openings.
"Coles has 749 stores. IGA/Metcash (whom the MGA represents) have 1365 stores, and 700 Foodworks stores.
"Metcash’s 2012 annual report advises that they opened 58 new IGA stores in the last financial year.
"In the same period, Coles opened 19 new stores and closed 11."
A Woolworths spokesperson told Food Magazine that “given it’s an industry issue, you need to speak to the industry body,” and would not provide any further comment.
Food Magazine then contacted industry representative body the Australian National Retailers Association (ANRA) for comment, but received only a media release singing the praises of Woolworths and Coles.
"A report attacking Australia’s leading supermarket retailers has been rejected as long on accusations and short on facts, by Australian National Retailers Association (ANRA) CEO, Margy Osmond," it states.
“The Master Grocers Australia (MGA) report is designed to be as sensational as possible at the expense of two highly successful Australian companies, Coles and Woolworths,” Osmond said.
The MGA represents the IGA group of retailers and far from ‘fair competition’, what they recommend will tilt the playing field in their favour, at the expense of consumers, she said.
“It is time that IGA came out from behind this myth they are a small business – they have a substantial slice of the grocery and liquor market in Australia.
“Aldi, a foreign owned entrant to the market, has grown from zero to 300 stores in less than a decade, a clear indication of the demand and the level of competition.
“More regulation, as called for in this report will only damage companies that employ more than 300,000 Australians and support hundreds of local businesses.
"The major chains play a critical role in regional communities where they represent jobs and cheaper prices for local consumers.
“The Australian supermarkets are leading the charge to bring the lowest possible prices to consumers, while still supporting local growers and manufacturers.
"Australian families struggling to cope with cost of living challenges like increasing electricity prices benefit from the price cutting competition that exists between the major supermarket chains.
“To suggest that Coles or Woolworths are deliberately establishing loss making stores to limit local competition is a nonsense. It does not make good business sense.
“This IGA-inspired report suggests that Australian shoppers need the Government to make their decisions for them and tell them, where, when and how they can shop.
"Nothing could be further from the truth,” Osmond said.
When we contacted a representative from ANRA to discuss the impact of the supermarket price wars on Australian workers and families who are out of business due to the duopoly, Food Magazine was told they did not speak about the pricing and operations of the business and we should go back to Woolworths for responses.
Here at Food Magazine, we are always hearing the shocking stories from manufacturers, farmers and suppliers about the impact of the supermarket duopoly’s power, but so few are ever willing to go on the record with their complaints.
The Senate Inquiry struggled to get anyone to speak up, because they were afraid of the consequences, we suffered the impact of the same fear campaign in organising the Food Magazine Industry Leaders Summit and Coles and Woolworths continue to maintain that what they are doing benefits their consumers.
Unfortunately, it is putting more Australians out of work as facilities move offshore and companies go bust.
Food Magazine was also told by a Coles representative that more favourable coverage of the supermarkets would result in more requests for comment being returned, but we are not willing to bow down to any form of bullying.
Do you agree with us that we need a Royal Commission into the supermarket powers?