The ACCC has released its final Supermarkets Inquiry report, which includes 20 recommendations aiming to improve competition in the supermarket sector, make a difference for consumers and give suppliers fairer bargaining conditions.
Here is how the industry has responded.
Retailers emphasise consumer choice
Coles and Woolworths have both acknowledged the release of the ACCC’s final report and are reviewing the report and its recommendations in detail.
“Coles believes Australia’s grocery sector is highly competitive, is evolving rapidly, and offers consumers greater choice than ever before,” the retailer said in a statement.
“Over recent years, Coles has not only been competing with traditional supermarkets like Woolworths and IGA but also now with major multinational players like ALDI, Costco, and Amazon, who have all established significant businesses in Australia and are expanding their market share.”
Woolworths Group CEO, Amanda Bardwell, said customers have greater choice than ever before and are cross-shopping between different retailers more often.
“Our experience, in store and online, is that the Australian grocery sector is very competitive,” she said. “If we don’t get it right for our customers, they shop elsewhere.”
Rising costs
The two majors reiterated ACCC’s findings that grocery price increases during the past five years are significantly impacted by the rising cost of doing business.
“Coles and its suppliers have faced significant increases in costs like electricity, rent, insurances, wages, transport, and other costs essential for running a supermarket. We do not control these inflationary costs in the economy – but they contribute to higher grocery prices for Australian households,” Coles said.
Coles noted its Net Profit After Tax has remained at around 2.6% as a percentage of sales throughout the last five years, including through Covid-19 and the height of inflation.
“This means we earn around $2.60 for every $100 a customer spends in our stores – less than 3c in the dollar,” Coles said, adding its NPAT margins are comparable to global peers including countries like Canada, the US and the UK.
“Overall product margins have increased nominally to cover rising costs, but the ACCC’s analysis of these margins excludes the other significant costs like energy, rent, wages which have all increased. Coles Earnings Before Interest and Tax (EBIT) has been broadly flat for five years,” it said.
Ms Bardwell said Australian Food business have now declined for four consecutive quarters, as noted at its F25 Half Year Financial Result.
“We fully understand that customers want us to make it easier to find value, especially as the cost of living remains their major concern,” she said.
“We recognise they have experienced several years of significant inflation, with an escalation in the cost of mortgages, rent, transport, insurance, energy, food and many other household essentials.
“As reported by the ACCC, supplier costs to supermarkets also increased dramatically in the wake of the Covid-19 pandemic,” Ms Bardwell said.
Proceed with caution
Both Coles and Woolworths have welcomed any recommendations that improve transparency for customers and suppliers, while expressing caution of unintended consequences, including increasing red tape and driving up costs.
The sentiment is reiterated by the Australian Retailers Association (ARA) Chief Industry Affairs Officer Fleur Brown.
“It is important that regulatory changes do not inadvertently increase supplier costs or introduce inefficiencies that could place upward pressure on prices,” she said.
“Our supermarkets operate one of the longest supply chains in the world, with low population density so these businesses must be profitable and operate efficiently to operate and serve millions of Australians across the nation.”
Ms Fleur notes that supermarkets have proactively implemented many measures to benefit consumers and suppliers, including enhancing pricing transparency, increasing promotional offers, expanding affordable product ranges, and streamlining supplier engagement.
“Our members are committed to policies that drive down business costs, ensuring that savings can be passed on to consumers,” she said.
Coles said it will remain “committed to being part of industry-led solutions” and will be working “even more closely with our suppliers, including fresh produce producers, to improve transparency and ways of working with them and all industry participants”.
Ms Bardwell said Woolworths will review the report and its recommendations to identify any insights to make the retailer a better business for all parties.
“We play an important role in the lives of millions of Australians, more than 200,000 team members, and our suppliers,” she said.
“We have taken steps to improve the experiences customers and suppliers have with us, and continue to listen carefully to all of them.”
CHOICE welcomes pricing recommendations
Consumer group CHOICE, which has been producing government-funded reports on supermarket prices across Australia, has welcomed the report’s recommendations around price transparency.
“People continue to be worried about the cost of groceries, with 84% of Australian households concerned about the cost of food and groceries,” said CHOICE CEO, Ashley de Silva.
“We need to fix the power imbalance between supermarkets and consumers and price transparency will help us do that.”
He highlighted the value of the recommendations around publishing pricing information, requirements for discount price promotions and notifications of package size changes.
“Our 2024 research showed 1 in 4 people found it difficult to identify if certain supermarket labels represented a true discount or not. Sometimes labels claim a discount, but don’t specify how much or note the previous shelf price, making the claim impossible for consumers to verify. Introducing minimum information requirements on price displays will help stop supermarkets obscuring endless price increases,” Mr de Silva said.
“Last year, CHOICE identified 15 supermarket products that had reduced in size, with the price remaining the same or increasing. Consumers deserve more information when shrinkflation occurs, and the recommendation to introduce shrinkflation notices will help everyone make better-informed decisions while shopping.
“To make informed decisions, consumers need good information. The recommendation to require supermarkets to publish prices in-store and online, and make it easier for price comparison tools to access pricing information, will help consumers compare and shop around to get the best value,” Mr de Silva said.