The extent to which customers have lost trust in Australian supermarkets and the tactics used by Coles and Woolworths to price products differently across the country has been revealed by a scathing new report.
The Australian Competition and Consumer Commission (ACCC) report also questions whether supermarkets are increasing profits at the expense of primary producers.
It also reveals shoppers could pay more at one of the supermarket giants’ smaller footprint stores.
Report summarizes competition watchdog’s mid-term findings .
Here are some of the ACCC’s key findings so far.
Customers are losing confidence in supermarkets
Many consumers told the survey they were losing confidence in supermarkets’ claims about sales prices.
“These difficulties are believed to be due to certain pricing practices of some supermarkets, such as frequent promotions, short-term discounted prices, bulk purchase promotions, members-only prices and bundled prices,” said Vice -president Mick Keogh.
Nearly half of those surveyed in the ACCC’s recent consumer survey said they ‘always’ or ‘most of the time’ compare prices between stores before shopping.
Many customers have also expressed concern about being penalized financially for not signing up to loyalty programs such as FlyBuys or Everyday Rewards, run by Coles and Woolworths respectively.
“With the introduction of members-only pricing, some consumers may feel they have no choice but to participate in loyalty programs, even if they are concerned about handing over their data to supermarkets,” Keogh said.
Supermarket profits scrutinized
The price of a typical grocery basket has increased more than 20 percent over the past five years, according to the survey, leaving many .
The ACCC also examined the extent to which the rise in supermarket prices is due to an increase in production costs.
Woolworths’ response to the investigation said the company had “faced an unexpected number of cost increase requests from packaged food suppliers”.
In a recent statement, Coles said its price increases were linked to the large number of price increases from its suppliers, “which has led to an increase in the retail price of many products”, as reported the ABC.
However, a confidential response to the survey claims that primary producers receive the same price for horticultural products as before the COVID-19 pandemic, despite higher production costs.
The submission says primary producers have failed to make a profit over the past 12 to 18 months and have failed to pass on their increased costs to retailers.
Another submission from the Australian Fresh Produce Alliance states that “on average, the cost of producing fruit and vegetables in Australia increased by 18.9%” between 2018-19 and 2022-23.
At the same time, the ACCC found that in recent years Coles and Woolworths had increased their earnings before interest and tax (EBIT) margins, a key indicator of company profitability.
“Our preliminary analysis suggests that Coles and Woolworths may appear more profitable than some of their international peers, using certain profitability metrics,” the report reads.
“However, this depends significantly on the profitability measure adopted and the level of activity considered.”
“Many Australian consumers and food suppliers have told the ACCC that they are concerned that some Australian supermarkets hold considerable market power and engage in practices that disadvantage both their customers and suppliers “, the competition watchdog said.
You could be charged more to shop at a metropolitan retailer
Coles told the inquest it charged customers the same price for the same products in its supermarkets and Coles Local stores.
Woolworths, meanwhile, admits prices can vary between its supermarkets and Metro outlets.
Major supermarket chains told the ACCC that, “in practice, the prices of most of their products are consistent nationally”, but that “some products may have different prices between stores”, For example :
- When products are reserved for customs clearance
- When the products are the subject of State promotional activity
- For fresh foods, the price of which is generally set by the state
- For remote stores, due to higher transportation or freight costs to these areas
- When products are purchased online or in stores of different formats
- Where the products are subject to a state or territory legislative requirement.
The ACCC said it was “collecting detailed information from supermarkets on food prices and pricing practices to assess these matters in more detail” and would include its findings in the final report.
What will the rest of the investigation focus on?
The ACCC noted that the price of food in supermarkets was largely in line with inflation of other goods and services, and that food price inflation in Australia was, in fact, lower than in most other countries. countries of the Organization for Economic Co-operation and Development (OECD). .
But she said she would spend the remaining months of the inquiry looking closely at whether and how supermarkets’ market power was impacting consumers and suppliers.
It will be particularly interested in these 14 products:
- Beef
- Chicken
- Pork
- Bananas
- Apples
- Strawberries
- Cucumbers
- Potatoes
- Eggs
- Milk
- Cereal
- Cookies
- Pet food
- Dishwasher tablets
“We will examine whether supermarkets are exercising market power to increase retail prices more than necessary to meet the increase in wholesale prices paid by supermarkets,” Keogh said.
“We also examine whether supermarkets engage in other commercial practices that may cause harm to consumers or suppliers.”
The ACCC will also conduct public hearings involving senior executives from major retailers in November.
The ACCC’s final report is expected in February 2025.
