It might not have the explosive drama of a Senate inquiry but for the past 10 days hearings led by Australia’s consumer watchdog have been quietly unpicking the mechanics of the nation’s supermarkets.
Today, one of the big two will front up to the ACCC, awkwardly as the watchdog is also separately taking Woolworths and its competitor Coles to court for allegedly duping their customers on discount pricing.
That legal action cannot be mentioned at Monday’s inquiry.
Yet, testimony from grower advocates and smaller supermarkets Aldi and Metcash has already warmed the stage for Woolworths and then Coles later this week.
Their bosses should expect to be grilled on everything from pricing to margins, development plans, and the way they deal with their vast network of suppliers. (With legal counsel on hand, of course.)
Everybody fronting the ACCC’s inquiry has been compelled to be there.
One person who has already given testimony, over two days at a secret location in Sydney, is Peter Hall.
“It was interesting. It was a bit like a court case,” Mr Hall told ABC News.
Mr Hall has interests in a pear and apple orchard in regional Victoria and has spent the past 40 years negotiating as a grower, including with the two big supermarkets. (ABC News: Sean Warren)
Mr Hall has interests in a pear and apple orchard in regional Victoria and has spent the past 40 years negotiating as a grower, including with the two big supermarkets.
His testimony, alongside two representatives from grower advocacy groups, reiterated long-held concerns from Australia’s agricultural sector.
“The chain stores have grown in size, and it’s become a real duopoly, and it’s been unchecked by governments,” Mr Hall told ABC News.
“There’s a real power imbalance now between chain stores and growers.”
Mr Hall and the advocates explained to the ACCC why growers faced such uncertainty when dealing with major supermarkets.
The inquiry heard that suppliers signed a blanket contract when they signed up to supply a product but it did not include terms such as price or quantity.
Suppliers can also face costs such as freight and promotional charges, as well as “rebates” or enforced discounts on their bills when retailers make orders.
“They’re in the enviable position of being [able to] dictate both the price they buy from and dictate the price they sell from,” Mr Hall told ABC News.
Mr Hall has interests in this pear and apple orchard in regional Victoria. (ABC News: Sean Warren)
In carefully worded remarks, advocacy group AUSVEG last Friday even aired concerns from growers that “deliberate market distortion” was occurring.
The allegation is that the big two supermarkets are intentionally ordering too much produce so that at delivery time to the retailers so much excess stock is flooding the market that it keeps prices low.
Coles and Woolworths together control 67 per cent of supermarket sales nationally.
Both companies have consistently maintained they have fair dealings with suppliers and that gouging is not occurring. They have also both vowed to fight the ACCC’s legal action against them.
The federal government asked the ACCC to conduct this inquiry, amid political pressure about food inflation and the cost of living.
The ACCC’s scope is not just the big two, with German supermarket Aldi and IGA franchise owner Metcash already roped into proceedings, too.
The watchdog’s already-released interim report notes it is focusing on barriers to entry in the supermarket sector after observing Aldi has taken 20 years to build up a 9 per cent share of national retail sales.
The findings also show the big two hold significant numbers of undeveloped sites, with Woolworths having the bulk at 110 lots compared to 42 held by Coles.
At their inquiry slot last week, the heads of Metcash reiterated concerns that this could be part of a tactic known as landbanking to keep out competition.
The ACCC’s interim report also noted that it had compelled Coles, Metcash, Woolworths and Aldi to provide pricing data on 2,000 items.
Last week, while grilling Metcash bosses, the inquiry gave a glimpse into its analysis of this vast inventory.
“Our preliminary analysis suggests that average product margins vary significantly across products within and between supermarkets,” a slide show read out to the inquiry read.
“The simple average product margin for the supermarkets ranged between 21 per cent and 31 per cent.”
Metcash’s bosses were also asked about the possibility of new blanket pricing rules to tackle issues such as “shrinkflation”, where product prices stay stable but the amount of food in a packet is quietly reduced.
“We would comply with any system legislation in Australia,” Metcash’s boss Grant Ramage said.
“I think it would, especially in smaller stores, add to their administrative burden to continue to put up more tickets,” he said, adding that IGA’s franchisors had smaller capacities than the big two supermarkets to manage these sorts of logistics.
Aldi controls 9 per cent of the market after 20 years in Australia. (ABC Rural: David Claughton)
As well as concerns about competition, pricing and unfair pressure on suppliers, the ACCC’s inquiry also offered a rarer glimpse into the inner workings of Aldi.
Unlike Metcash, Coles and Woolworths, which are all listed companies on the stock market, the German supermarket operates privately in Australia, and doesn’t disclose information like profit margins and expansion publicly.
Aldi’s manager of national buying Jordan Lack told the ACCC that it could compete with the majors because it operates smaller stores with fewer staff, and has its direct model of selling a limited range of mostly private label or home-brand offerings.
Mr Lack also gave the inquiry some insight into why prices increased so rapidly in supermarkets during the years of peak inflation.
“To give some colour as to why inflation was occurring, in 2022/23 we had 1,396 requests from suppliers [for] cost increases,” he said.
“That is a significant proportion of the 1,800 lines we have in our core range, and those requests came outside of of the normal tender process. We accepted 78 per cent of those in full, because we understood the industry was experiencing significant cost pressures, as we were too.”
IGA says it offers competition to Coles and Woolworths but the differing scale makes things difficult. (ABC News: Kate Ainsworth)
ACCC chair Mick Keogh was interested in Aldi’s perspective on the differences between the competitive landscape in Australia and Europe.
“One thing we would observe is that there are more competitors in many other markets that we operate,” Mr Lack said.
The last time the supermarkets received a thorough examination from the competition watchdog was in 2008.
Tellingly, at last Friday’s hearing, the ACCC flashed up a slide from that report, too. Sixteen years on, its unclear what the ACCC will be able to do about issues that it finds this time, with the power back on the federal government to act on its final report.
The final report is set to land in early 2025, just before a federal election is expected to be called.
Mr Hall has seen many inquiries into the supermarkets over the decades. He isn’t sure what this one will achieve, but hopes there is political will beyond funding a report.
“What we really seek as growers is a system that probably gives us a lot more information about environment we’re selling our fruit into,” Mr Hall told ABC News.
“And perhaps a better position to negotiate fairly with very large players.”
