Coles and Woolworths urge ACCC to conduct ‘fact-based’ inquiry into ‘highly competitive’ supermarket sector

Australia’s major supermarkets are pushing for a “fact-based” inquiry by the competition watchdog, which has just kicked off a year-long inquiry into the sector.

Just weeks after the Senate handed down its final report into supermarket prices, submissions by Coles and Woolworths to the Australian Competition and Consumer Commission have been made public in which both retail giants double down on assertions the sector is highly competitive.

The Senate inquiry’s findings were criticised by the Government and its hearings were marked by heated exchanges between chief executives and chair Nick McKim, and repeated questions — and eventual recommendations — that the government be able to break up the supermarkets with divestiture laws.

The supermarkets have pushed back on that suggestion, noting their respective large national reach allows them to deliver on standardised, statewide pricing, invest in their store network and product delivery for customers, and deliver on customer expectations for sustainability.

The Senate inquiry also barely acknowledged changing customer demands and habits, acknowledging global behemoth Amazon just three times despite both Woolworths boss Brad Banducci and Coles chief Leah Weckert affirming the US company was a major competitor in Australia.

Woolworths and Coles in their submissions to the ACCC have renewed claims that Australia has a highly competitive grocery sector, citing research that Australian shoppers are more likely to “cross-shop”, or visit more than one grocery retailer, than shoppers in many other countries.

The ACCC last inquired into the supermarket sector in 2008. Both said the advent of digital shopping as well as Costco and Amazon’s arrival and Aldi’s dramatic scale-up since then had enhanced competition, as had the “thriving” independent sector. Coles said many shopping centre owners relied on major supermarket tenants to establish foot traffic which then supported independent food retailers like butchers, greengrocers and delicatessens.

Both also pointed to Aldi’s huge rise, with the German group’s physical store numbers since 2008 in Australia up 249 per cent, compared to 42 per cent for Woolworths and 14 per cent for Coles.

The ACCC inquiry is the latest the supermarkets are confronting, with a Queensland Parliamentary inquiry due to report next week and the SA Parliament conducting hearings, while Victoria is poised to hold similar hearings. The Federal Government has also ordered a review of the Food and Grocery Code — both of the majors support it becoming mandatory — and has funded consumer advocacy group Choice to carry out price monitoring work.

“Intensified competition at the retail level means we have to compete harder to grow our business with suppliers,” Woolworths said, adding that the strong competition had helped keep a lid on grocery price inflation in Australia.

“Three of the world’s biggest and most competitive retailers (Aldi, Amazon Retail and Costco) are present and growing in Australia, and offer compellingly different value propositions that further increase competitive tension.”

Coles urged the ACCC to take a “forward-looking approach” to consider online competition as well as the global giants, particularly given the number of people shopping just once a week at a major supermarket had fallen.

“Cost of living pressures are also resulting in substantial shifts in traditional purchasing behaviour, in particular a greater willingness to search out value through alternative distributors of traditional grocery products, including on-line operators such as Amazon,” it said.

The ACCC is due to issue an interim report in August.