Supermarket greed and the grocery duopoly between Coles and Woolworths are key explanation why costs for groceries have elevated, inflating cost-of-living pressures on struggling households, consultants say.
In May, analysis carried out by funding financial institution UBS discovered the price of meals at Coles elevated by 10.4 per cent in April, with Woolworths growing by 8.7 per cent in April.
The analysis analysed greater than 60,000 grocery store merchandise, with costs for contemporary meals reporting an enormous 9.9 per cent leap.
Former Australian Competition and Consumer Commission (ACCC) Chair Rod Sims blamed rising grocery store costs on a scarcity of competitiveness, citing Australia’s duopoly between Coles and Woolworths, which maintain a mixed market share of about 70 per cent.
According to Statistics, the Woolworths Group holds 37.1 per cent of the market share, whereas Coles Group has 27.9 per cent. Aldi holds 9.5 per cent, IGA owns 6.9 per cent and the remaining 18.6 per cent is held by different retailers, which additionally embody Costco, Amazon, and impartial grocers.
“When you get a period of inflation and rising costs, that always allows the question of how much can we increase our price to cover the rising costs?” she stated.
“(From their increasing profits), it’s clear that Coles or Woolworths increase their prices by more than their costs and I think they find that easier to do because there’s just two of them.
“If they’re both doing it, that’s fine, there’s no competitive detriment… and clearly that means higher prices for consumers.”
Mr Sims has advocated for extra merger reform, which might stop Coles and Woolworths from buying impartial or smaller supermarkets.
Speaking to a federal parliamentary inquiry into grocery store costs, the present ACCC boss Gina Cass-Gottlieb stated she “absolutely (shared) concerns” on the “level of concentration in the supermarket sector”.
While she stated there have been different components driving larger costs, these parts could also be “competed away” in a “more competitive market.
“I would accept that there is less constraint on them in a price competition than we would want to see,” she informed the inquiry on Wednesday.
Recently the patron watchdog additionally publicly opposed Woolworths’ acquisition of SUPA IGA in Karabar, NSW. It cited considerations the takeover means Woolworths would function three of six supermarkets within the native Queanbeyan/Jerrabomberra space.
Supermarket giants accused of scapegoating inflation
While Mr Sims agrees that rising inflation, logistic points, and provide chain logistics can partially be blamed for elevated prices, grocery store revenue margins indicated costs had elevated greater than “justified”.
In February, Coles reported a $616m revenue in the identical interval, indicating a rise of 11.6 per cent.
The Woolworths group, which incorporates supermarkets, Metro shops and Big W, posted a $907m revenue within the first half of the 2022/23 monetary 12 months, a 14 per cent year-on-year enhance.
According to the Australian Bureau of Statistics (ABS), the month-to-month Consumer Price Index indicator elevated by 6.8 per cent to April 2023, barely larger than 6.3 per cent annual rise in March.
An annual 7.9 per cent worth hike in meals and non-alcoholic drinks was the second most important worth hike, nonetheless it reported a marginal drop from 8.1 per cent the month prior.
“That’s the issue,” stated Mr Sims.
“It’s not that prices shouldn’t go up for inflation, of course they should, but if they go up by more than inflation then you’ve got to say: ‘Well how are they able to do that?’”
The Australia Institute’s Director of the Centre for Future Work, Jim Stanford was extra pointed in his criticism and accused supermarkets of benefiting from a “conjuncture of circumstances since the pandemic, to fatten their profit margins”.
“After the pandemic, there were some unique circumstances, that allowed greed to go to town, and we ended up with unusually wide profit margins in a number of key sectors,” stated Dr Stanford.
Dr Stanford was additionally essential of supermarkets scapegoating elevated provider prices.
“Every company tries to point the finger at their own suppliers and say ‘look we have to pay more for our input, so we have to charge more for our output,’” he stated.
“That is mathematically impossible, when the companies are earning higher profits. If all they were doing was passing on higher input costs, their profits wouldn’t change.”
Supermarkets counter worth hike acusation
Despite Dr Stanford’s remark, a Woolworths spokesman stated a “key driver of grocery inflation” was the “higher wholesale prices (supermarkets) are paying to our suppliers for goods”.
It’s understood suppliers have elevated wholesale value will increase at 4 to 5 instances above ordinary ranges, fuelled by value of elements, power payments and labour charges. These prices could make up about 70 cents in each greenback spent on the grocery store.
“The same dynamic is playing out across the OECD, where food inflation has been running at almost double the rate in Australia,” they stated.
“Our grocery sector is fiercely competitive and continues to intensify as retailers seek to respond to the impact of technology, online innovation and the expansion of global retailers.
“We understand Australians are feeling cost-of-living pressures and we will continue to work hard to offer great value to our customers.”
A spokesman for Coles credited their gross margin enlargement on decreased Covid-related prices and their Smarter Selling program, which goals to “deliver cumulative benefits of $1b by the end of FY23,” by measures like loss prevention and provide chain efficiencies.
They additionally credited strategic sourcing, which can embody utilizing long-term contracts with producers which can assist them enhance their manufacturing potential and scale back unit prices.
“Coles has never invested more in our customers than now. We know many of our customers rely on us to help them make ends meet and we are working harder than ever to deliver on value,” they stated.
“At a time when cost of living pressures are mounting for many customers, Coles is committed to help Australians with a range of value campaigns to support customers in tough economic circumstances.”
With cost-of-living an ever growing stress level on households, supermarkets have moved to lower prices.
On May 24, Woolworths minimize prices on greater than 450 grocery costs, like Birds Eye Oven Bake Fish ($8 from $10.50), Woolworths Corned Australian Beef Silverside ($10 from $12), and D’Orsogna Shortcut Bacon 1kg ($13 from $19.50). Prices will stay frozen till August 22.
Coles has the same Dropped & Locked program, the place costs on on a regular basis gadgets are lowered and frozen for a set period of time, with present charges set until July 4.
This week, IGA, which is owned by Metcash, dedicated to slashing costs on hundreds of costs for 3 months in an effort to ease cost-of-living pressures.
Source: www.perthnow.com.au
