Coles, Woolworths and alleged price gouging
Sam Hawley: Hi, I’m Sam Hawley, coming to you from Gadigal land. This is ABC News Daily. As you head to the supermarket to stock up for Christmas lunch, you can try and shop around for a deal, but it’s not easy. With Coles and Woolies dominating the market, and, according to the Greens at least, you’ll be paying too much, because the big players are allegedly price gouging. Although they deny that. Today, ABC investigative reporter Adele Ferguson on why an inquiry into the duopoly is just what’s needed and how governments could rein them in.
Sam Hawley: Adele, the supermarkets, I think they’re in a festive spirit because Woolworths, it’s going to cut the cost of lamb by 20 per cent. How generous of it…
Adele Ferguson: Well, if you were a cynic, you’d say it’s because they’ve been under quite a bit of pressure. You know, livestock owners have been coming out saying that over the past year, livestock prices in cattle have gone down about 70 per cent…
ABC News clip: A lot of farmers are sort of worried about where the prices are. There’s no doubt about that…
Livestock producer: Livestock prices are terrible. The remaining loads I’ve got to sell now we’re talking $2 a kilo. We were north of over 6 bucks a kilo 12 months ago, so it’s significantly less…
Adele Ferguson: …and it hadn’t translated into price decreases at Woolies and Coles. And the same with lamb. So you could say that’s the reason really.
Sam Hawley: Okay, I think we’re all cynics when it comes to our food shopping to a certain extent. And the livestock market, it has rebounded somewhat in the last couple of months. But supermarkets, they’re still making a nice hefty profit, aren’t they? And they will make even more over the festive season, I’m sure. But what about us, Adele? Because as we go about our Christmas shopping, you know, just doing an ordinary shop right now is exorbitant and it just doesn’t feel like anything is getting cheaper. When we do our Christmas shop, it’s going to be even more, isn’t it? Because we like to have the nice things?
Adele Ferguson: Yeah, that’s absolutely right. Because if you look at the latest statistics and look at the essential consumer products such as bread and cereal, it’s up 8.5 per cent, dairy is 7.8 per cent and meat and fish is up 1.8 per cent. And that’s a really interesting figure because as I was just saying, livestock prices have plunged. And yet when you look in the CPI, meat and fish are up just 1.8 per cent. And that’s why you’ve really got to look behind what’s going on here.
Sam Hawley: Okay, so that’s what we want to do with you. We’ll discuss a bit further the profit margin of these supermarkets and why perhaps we’re paying so much, but it’s pretty hard in Australia, isn’t it, to really shop around because we don’t have a lot of options?
Adele Ferguson: No, that’s exactly right. Coles and Woolworths really dominate the supermarket industry. They represent about 66 per cent market share. So that means in most suburbs that you go there’ll be a Coles or a Woolies or even both. So it really crowds out the market for other competitors.
Sam Hawley: Mhm. Yeah. All right. So they have a duopoly I mean we do have Aldi, IGA, there’s Costco. But the problem with those supermarkets I find, is that you can’t get everything that you want. Why is it at all that we just can’t have more competitors out there?
Adele Ferguson: Well Coles and Woolies, as I said, they’ve got about 66 per cent of the market share. And they have these property developers who are out looking all the time for locations. So in the last year, both of them net averaged 23 or 25 new big stores that they built around the country, which is a lot because these are $10- $20- $30 million properties. So it makes it really difficult for the smaller players to try and source them.
Sam Hawley: There’s a lot of Woolworths and there’s a lot of Coles, we know that. Let’s now look at how much the big supermarkets are charging us for things and whether or not that’s fair. We know the supermarkets make big money, right?
Adele Ferguson: No, that’s exactly right. And that’s why we really if you have a look at the the sort of profits that these two companies have made, it’s over $1 billion. And if you dig further and look at the profit margins, they’re between 5 to 6 per cent, which is so much higher than the rest of the world where there is so much more competition. So it really boils down to how competitive the market is. And unfortunately in Australia it’s not that competitive. And so you don’t get the sort of price decreases that you should get.
Sam Hawley: So in the UK there’s heaps of competition. Of course there’s lots of different supermarkets and their margin is about 3 per cent. So you’re saying we’re about double that…
Adele Ferguson: Yeah, so Woolworths in its latest financial results the margin was 6 per cent which is a really fat margin for a supermarket chain.
ABC News clip: As consumers feel the pain of rising food costs. Claims that the big two supermarket chains are price gouging are gaining traction…
Sam Hawley: Well, the Greens allege that the supermarkets are price gouging and they called for a Senate inquiry, which they actually got. So there will be an inquiry into this.
Nick McKim, Greens Senator: We want to use this inquiry to examine the price setting practices of Coles and Woolworths. We want to use this inquiry to deliver greater transparency around the supply side…
Sarah Hanson-Young, Greens Senator: We do need a focus on these big corporations who take so much out of the pockets of families and Australians while raking in billions of dollars worth of profits.
Sam Hawley: Just remind me, Adele, what is price gouging?
Adele Ferguson: Price gouging is where it’s an unfair increase in prices. So for instance, during covid, you saw, you know, in some places toilet rolls went up to $20 for a roll of toilet paper. That’s gouging. That’s taking advantage. There may be a supply chain shortage, and people will come in and exploit it and just start gouging people.
Sam Hawley: Hmm. But do we have any evidence that that is what supermarkets are actually doing here?
Adele Ferguson: Well, some people suggest that there is evidence. You could argue that with the prices of beef, when you’ve got a 70 per cent decrease in livestock prices, how is it that hasn’t translated when you go into the supermarket, what’s going on there? And that’s why you really have to look at the supply chain and see what is going on. And we don’t have that transparency. And therefore that’s why we need some sort of an inquiry to see just how significant the price gouging is.
Sam Hawley: Mhm. Of course Woolworths and Coles, they deny that price gouging is going on. They say that inflation remains the main problem here, that they’re just passing on supply costs. That’s true in a sense isn’t it?
Adele Ferguson: It is to a degree. But then you have to look at what are they doing to the suppliers. Because if you talk to some suppliers who won’t go on the record for fear of retribution, they’ll say that they’re getting gouged. They have to give the supermarket chains these products at a much cheaper price, and they can’t afford it.
Sam Hawley: Well, these supermarkets though, Adele, they’re just big firms, right? They’re listed on the stock exchange. The company bosses are just trying to please shareholders, I suppose. So we should expect this, shouldn’t we? It’s not illegal…
Adele Ferguson: Price gouging in Australia isn’t illegal. It is in other places. In fact, in some states in the United States, it’s criminal. Uh, here it isn’t. And you’re right. These companies, if they’re allowed to do it and they’re not breaking the law, why wouldn’t they? Because one of their key stakeholders are shareholders. And that’s why you need better regulation. And that’s why you need inquiries just to see what can be done to change things.
Sam Hawley: So tell me more about this Senate inquiry. I mean can it really do that much?
Adele Ferguson: Well Senate inquiries are good in the sense that they give people a chance to speak out. So, they can also call up the CEOs and companies hate to have their trust breached. You know. So I guess what I’m saying by that is these companies live and die by their reputation. And so if there’s talk about price gouging and exploitation of customers, that really damages them and they really don’t want that. And so a Senate inquiry gets a lot of media attention. You know, we saw that with Alan Joyce and Qantas…
Alan Joyce, former Qantas CEO: Qantas is now the most on time and the lowest level of cancellations of any of the major carriers for 11 of the last 12 months-
Bridget McKenzie, Nationals Senator: But, still the most complained about entity to the ACCC in this country – more than Woolworths and Coles…
Adele Ferguson: AMP – when you know there was the Royal Commission – and there was the fees for no service, it can really harm a company. And so that’s why these sort of inquiries are good, because it really puts the spotlight on them and they have to answer some difficult questions.
Sam Hawley: Mhm all right. Well that will take a while of course. And it’s not going to make our Chrissy shop any cheaper at this point, Adele. So what else should be happening? Do you think The National’s point to the ACCC. Is it doing enough?
Adele Ferguson: Well the ACCC doesn’t have all of the powers in its toolkit that some other countries give their competition regulators. So I think what the Nationals are calling for are the ACCC to to look into price gouging…
David Littleproud, Nationals Leader: These supermarkets have form. They did us over during Covid. The ACCC former chair made that very clear that those big profits that they made was at the expense of the consumer and supplier. And so it’s important now that we call them out as quickly as we can.
Adele Ferguson: ...and that requires the government. They can’t just do that off the bat. They don’t have the power. So they need the government to say, go and have a look at this. And I think that it’s a good thing if they do, because there’s nothing wrong with having a parliamentary inquiry and the competition watchdog doing it as well. It just increases scrutiny and it makes companies do the right thing.
Sam Hawley: So David Littleproud’s been talking a lot about that. And also Allan Fells, the former ACCC chairman. What’s he been saying?
Adele Ferguson: So he’s been commissioned by the ACTU to look at prices across industries.
Allan Fels, former ACCC Chairman: The public wants answers on what’s happening at retail and that will happen. And also we can get in parliament aired a whole lot of policy questions- like I’m in favour of having a divestiture law that is to be able to break up big monopolies where a court thinks it’s the right thing to do.
Adele Ferguson: …and he’s saying that one of the things that they should be looking at is giving the ACCC the power of divestiture, which means when a company becomes too dominant, the ACCC would have the power to divest it of some of its businesses.
Sam Hawley: Wow. So how would that work? In the case of Coles, for instance?
Adele Ferguson: Well, Coles has, for example, it has liquor stores, Liquor Land and other other well known brands. It could arguably tell it to hive off that or say it can’t keep buying IGA stores that are for sale, you know, because there could be some suburbs where there are a Coles, a Woolies, an IGA and a Costco. And if one of them gets sold to the big two dominant supermarkets, it’s just going to have way too much dominance in that area.
Sam Hawley: There’s a strong push, obviously, for a really close look at how this duopoly operates in Australia.
Adele Ferguson: Yeah, absolutely. To just get behind the numbers.
Sam Hawley: So more powers for the ACCC is another option. There’s a Senate inquiry going on. But for now, Adele, we will be paying more won’t we, for our turkey than we did last year…
Adele Ferguson: It certainly looks that way.
Sam Hawley: So tell me, where will you be doing your Christmas shopping for your food?
Adele Ferguson: Well, although the supermarkets are very convenient places to shop, I’ll be supporting the small businesses and going to the markets.
Sam Hawley: Adele Ferguson is an investigative journalist with the ABC. This episode was produced by Bridget Fitzgerald, Nell Whitehead, Sam Dunn and Anna John, who also did the mix. Our supervising producer is David Coady. I’m Sam Hawley. ABC News Daily we’ll be back again tomorrow. To get in touch with the team, please email us on [email protected]. Thanks for listening.
