Australia’s competition watchdog has raised concerns over weak price competition between supermarket giants Coles and Woolworths, noting rising profit margins and strained supplier relationships. A new ACCC report found the retailers face “limited incentive” to undercut each other, with Aldi and Metcash unable to disrupt their dominance.
Market Power: ColesWorth’s Grip Tightens
The ACCC estimates Woolworths holds 38% of grocery sales nationally, while Coles controls 29%. Both increased profit margins recently, particularly on branded products like pet food and packaged goods.
- Woolworths saw the sharpest margin rise.
- Aldi provides “crucial” low-cost competition but lacks the scale to disrupt the duopoly.
- Metcash (IGA supplier) struggles to compete, with margins flat compared to rivals.
“Coles and Woolworths don’t meaningfully undercut each other on price,” the ACCC stated. Claims of competition from Bunnings or Amazon were dismissed as “unconvincing.”
Suppliers Squeezed, Fresh Produce Hit Hardest
Fresh produce growers face a “monopsony” – dominated by few buyers – leaving them vulnerable to unfair terms:
- Blanket contracts with no fixed prices/quantities.
- Hidden costs like freight fees and forced “rebates” (discounts).
- Fear of retaliation for speaking out.
“The more perishable the product, the weaker the supplier’s power,” the ACCC warned.
Australian Competition & Consumer Commission Demands Key Reforms
- Transparency: Public pricing data and scrutiny of discount claims.
- Supplier Protections: Oversight of rebates and contract terms.
- Loyalty Program Review: Address “confusing” pricing tactics by 2027.
- Support for Small Retailers: Boost funding for co-ops and independents.
Government Response
The Labor government pledged $2.9 million to help suppliers “stand up to the big supermarkets” but stopped short of backing breakup powers. ACCC will gain stronger merger oversight to curb anti-competitive acquisitions.
Coles and Woolworths’ profit surges come at the cost of shoppers and suppliers. With Aldi unable to tip the scales, ACCC reforms aim to level the playing field – but enforcement remains key.
