With these large chains owning petrol outlets, hotels, poker machines and hardware stores how can they be stopped ? Long gone are the friendly corner shops where you could put your groceries on tick.
Coles, Woolies ‘deliberately killing competition’
Updated
A new report by Master Grocers Australia has accused supermarket giants Coles and Woolworths of deliberately killing off their smaller competitors.
Master Grocers Australia, which represents smaller operators, says Coles and Woolworths are saturating the market and opening oversized supermarkets to squeeze out local competition.
The body says the evidence is now in and the Federal Government and the Australian Competition and Consumer Commission (ACCC) have to act.
In Australia, about $8 of every $10 spent on groceries ends up in the tills at Coles or Woolworths.
The Australian groceries market is one of the most concentrated in the world, and local retailers in towns like Toowoomba in Queensland struggle to deal with the competition from huge retail chains.
Locals say Toowoomba is drowning in a deluge of Coles and Woolworths supermarkets, pubs, hardware and liquor stores, petrol stations and discount outlets.
Debbie Smith, the owner of Foodworks Supermarkets Toowoomba, says Woolworths and Coles own five supermarkets each in the town.
“Toowoomba has about 100,000 people,” she said.
“There are approved plans to build another one for Coles and another one for Woolies, so within two years they’ll be six of each.”
Ms Smith is a rare breed, running one of the few independent supermarkets left in town.
She says it’s not just the number of supermarkets that Coles and Woolworths have opened, but the size of them that has killed the smaller operators.
“There are plans approved to put 3,500 square metres for Coles 800 metres from this store,” she said.
“We had 220 customers send letters of objection to the council during appeals process but to no avail. Do we need another one? No we don’t. Are we going to get another one? Yes we are.”
Master Grocers Australia, which represents players like Foodworks and IGA, says this scenario is being repeated across Australia.
“This behaviour by the chains is really putting at risk the loss of retail diversity, choice for consumers and true competition,” chief executive Jos de Bruin said.
In its report, Master Grocers Australia says opening oversized and unprofitable supermarkets is a deliberate strategy from Coles and Woolworths to wipe out competition.
This behaviour by the chains is really putting at risk the loss of retail diversity, choice for consumers and true competition.
Master Grocers Australia CEO Jos de Bruin
“They can sustain oversized supermarkets running at losses by cross-subsidising, and what we mean by that is a range of other businesses which draw their profits and run these loss-making stores for as long as they care too,” Mr de Bruin said.
‘Locals devastated’
Part of the strategy, Master Grocers Australia says, is for the supermarket giants to target marginal areas.
The picturesque town of Bright sits in the foothills of Victoria’s snow country.
Its 2,000 residents are proud of the community they have built.
But many say since Woolworths came to town two years ago, local producers and retailers have been devastated.
A total of 23 local businesses have been put up for sale or lease, and those still operating are suffering.
“The pharmacy is down by 30 per cent and the newsagency down by 25 per cent. The local diary is down by 30 to 40 per cent and has no opportunity to supply Woolies other than a small amount of milk produced – the rest of it is sourced centrally,” Bright Super IGA manager Nick Cooke said.
Mr Cooke says his IGA has lost half its sales and had to lay off half of its staff.
He believes the main problem is that Woolworths was allowed to open a supermarket that is much larger than is actually needed.
“When permit was approved there was already two supermarkets in town, more than adequately servicing the demands that existed,” he said.
If you open a new store in a new market that by definition would bring more capacity to the market than the market needs because it was fully saturated, the fact that a new store will lose money in its early days is normal commercial behaviour.
So to meet the test of being against the Act, being anti-competitive, means it has to be behaviour that will deliberately damage competition.
ACCC chairman Rod Sims
“The new Woolies is 2,500 square metres and that equated to 50 per cent excess capacity and unfortunately the smaller independent supermarket closed down and now we’re still at excess of 40 per cent.”
‘Great anxiety’
The Master Grocers Australia report is calling for the Federal Government and the ACCC to overhaul competition and planning laws.
“What we have seen are oversized supermarket development in a number of regional and country townships where some of the codes and regulations haven’t been adhered to, the planning principles haven’t been adopted, and it has caused great anxiety,” Mr de Bruin said.
The Federal Opposition believes there is merit in the report and says it sharpens the case for a review of competition laws.
“It identifies some clear pressure points and impacts on innovation in our economy, how if we don’t have proper competition laws and a pro-competitive environment, innovation suffers,” Bruce Billson, the Opposition spokesman for small business competition policy, said.
“That’s not good for consumers, not good for choice, and not good for the Australian economy in the long run.”
The Opposition wants to arm the ACCC with more powers to stop any market power abuse.
The ACCC says it will look at the claims of oversized supermarkets on a case-by-case basis.
“If you open a new store in a new market that by definition would bring more capacity to the market than the market needs because it was fully saturated, the fact that a new store will lose money in its early days is normal commercial behaviour,” ACCC chairman Rod Sims said.
“So to meet the test of being against the act, being anti-competitive, means it has to be behaviour that will deliberately damage competition.”
‘Consumer need’
A representative for Coles and Woolworths has rejected the Master Grocers report and all its findings.
“This is a report long on accusation and short on facts. This is a report generated by an organisation that is effectively another supermarket chain,” Australian National Retailers Association chief executive Margy Osmond said.
The association says Coles and Woolworths only open supermarkets on consumer need, not to knock out the competition.
“I think this is a bizarre accusation, that any business would set up to lose money,” Ms Osmond said.
“These are big public companies. They have shareholders to account to, there is no way they’re opening stores to lose money.”
The supermarket giants say they continue to invest significantly in Australia and employ hundreds of thousands of Australians.
