Vice-like grip … Coles and Woolworths control 80 per cent of our supermarket spend. Photo: Louie Douvis

MORE than half of all the money Australian households spend on food each year, including groceries, restaurant and takeaway meals, goes into the coffers of the supermarket giants Coles and Woolworths, a new report reveals.

The FOODmap report, released yesterday by the Department of Agriculture, Fisheries and Forestry, shows supermarkets now account for 63 per cent of all food sales in Australia – 80 per cent of which is controlled by Coles and Woolworths.

The report says a reduction in discretionary spending by consumers since the global financial crisis in 2008 has led to more meals being eaten in the home and has led to supermarkets receiving a greater share of the $130 billion spent on food and beverages in 2010-11.

Coles and Woolworths have been the major winners, the report says, by capitalising on the ”value-sensitivity” of consumers by promising lower prices and expanding their ranges of private-label products.

However, the report highlights the detrimental impact the price wars between the two majors is having on local producers and food processors – by slashing profit margins and driving an increase in cheap food imports.

Private label food products ”are estimated to currently represent about a quarter of all supermarket sales”, the report says. The value of imported food increased by more than 20 per cent to a record $10 billion since the last report was released in 2007.

The Australian Food and Grocery Council’s chief executive, Kate Carnell, said the report reinforced the need for the federal government to set up a supermarket ombudsman to oversee a new ”code of fair trading”.

”This just reinforces the absolute market failure caused by the enormous market power of Coles and Woolworths,” she said.

”As the report highlights, the more supermarket shelf being used for private labels the less shelf space there is available for Australian manufacturers. And if you do get on the shelf, the downward price pressure of these private labels makes it almost impossible for Australian producers and manufacturers to make a decent profit.”