**Australia**: The ACCC’s extensive report exposes how Coles and Woolworths exploit pricing strategies for profit amid rising living costs, leading to proposed reforms aimed at enhancing transparency and competition in the grocery market while addressing concerns over supplier bargaining power.
A significant report released by the Australian Competition and Consumer Commission (ACCC) has highlighted the pricing practices of major supermarket chains, Coles and Woolworths, amidst a rising cost-of-living crisis. Published late on Thursday, the expansive 441-page document concludes that these retail giants increased prices to enhance their profits, while employing promotional strategies that obscure the true value of deals for consumers.
The report reveals that Coles, Woolworths, and discount competitor Aldi are among the most profitable supermarket operators in the world, increasing concerns over their market dominance and the need for industry reform. The ACCC’s analysis indicates that Coles and Woolworths hold a substantial 67% share of the national grocery sales market, while Aldi accounts for an additional 9%, followed by Metcash-supplied stores, which hold a 7% share. This oligopolistic structure poses challenges for competition, suggesting that current market dynamics will likely persist.
In response to these findings, the ACCC has proposed 20 recommendations aimed at increasing transparency in pricing, promotions, and loyalty programs. Notably, the reforms would mandate that Coles, Woolworths, and Aldi publish all prices on their websites, thereby allowing online comparison tools to assist consumers in appraising whether they are receiving a genuine deal. The regulator also seeks to combat “shrinkflation,” the practice of reducing product sizes while maintaining price levels, by requiring stores to alert customers when such changes occur.
The ACCC’s deputy chair, Mick Keogh, spoke about the anticipated impact of these recommendations, stating, “There is no ‘silver bullet’ that will address all the issues we have identified in the supermarket sector, but we are confident that our recommendations will make a difference for consumers, will equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and will boost competition in the sector.”
The report, which was informed by public and private hearings and consumer surveys conducted over a year, emerges against the backdrop of an impending election where cost-of-living issues are likely to be at the forefront. In a related statement, Treasury Secretary Jim Chalmers emphasised the government’s commitment to ensuring fair practices in the grocery sector. He remarked, “This is about ensuring Australians aren’t treated like mugs by the supermarkets.”
The ACCC’s examination revealed that while grocery prices surged over the past five years—primarily due to increased business costs—the profit margins of Coles, Woolworths, and Aldi have also risen during this period. This suggests that a portion of the price increases could be directly contributing to heightened profits rather than solely reflecting heightened operational costs. Findings from Guardian Australia corroborate these observations, indicating that the major supermarket chains have utilised the inflationary climate to their advantage.
Furthermore, the report highlights the critical imbalance of bargaining power between supermarkets and fresh produce suppliers. It has been suggested that greater transparency in negotiations and supply commitments is essential to prevent financial losses for suppliers and waste of unsold stock. In light of these challenges, the ACCC has also recommended improvements to the unit pricing code which governs how businesses display prices, aiming to enhance the visibility and comparability of prices across different retail outlets.
As the government considers these recommendations for action, the potential reforms embody an effort to reshape the grocery landscape in Australia, ensuring a more equitable framework for consumers and suppliers alike.
Source: Noah Wire Services
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