‘Not equipped to help’: Four things the ACCC supermarket inquiry did and didn’t hear

“Why won’t you answer the question?”

It was a query that ACCC counsel assisting Naomi Sharp, SC, posed more than once to executives of Australia’s biggest supermarket operators as she attempted to extract answers about the grocery giants’ operations as part of the commission’s year-long inquiry.

Sharp has set out a consistent, methodical approach in her examination of Woolworths, Coles, Aldi and Metcash executives over the past fortnight. But she was often left frustrated when homing in on the topics of greatest contention: profits, margins, supplier relationships and trade terms.

ACCC counsel assisting Naomi Sharp, SC, led questioning in the supermarket inquiry hearings.Credit:

The country’s most senior supermarket executives were also asked about market competitors, private labels, shrinkflation, land banking, promotions, how discounts are funded, loyalty programs, and how negotiations with suppliers are structured.

After about 40 hours of questioning involving nearly two dozen executives, here are a few nuggets the inquiry did (and didn’t) uncover.

Amazon and Costco are diverting millions

The degree of competition in the supermarket sector is a point heavily contested by the dominant grocery chains. Chief executives at both Coles and Woolworths have disagreed with the ACCC’s definition of the sector as oligopolistic, saying retailers such as Amazon, Costco, Bunnings and Chemist Warehouse are growing market share in certain categories.

Customers are increasingly bulk-buying pantry staples from Amazon, the inquiry heard. “It covers now an increasing range of our products … and represents roughly 40 per cent of our total sales coverage,” said Woolworths CEO Amanda Bardwell. Her counterpart at Coles described Amazon as “quite disruptive to our business model”.

Amazon Australia sells more than 200 million products.Credit: Bloomberg

Meanwhile, Australians are travelling long distances to stock up on toilet paper from a Costco store, which can pull about six to eight times the sales of a typical Woolworths or Coles store, said Leah Weckert, chief executive of Coles.

“When a Costco opens, we do see a significant impact, millions of dollars of impact to our network through their openings, because customers are now basically buying a whole heap of products that they would have otherwise been buying from us in smaller quantities each week,” Weckert said.

Specifics? Can’t give you that

Many of the questions for Woolworths’ top brass were answered by Bardwell’s predecessor, former chief executive Brad Banducci, who held the top job for nearly nine years.

Questions about supply chain issues and trading terms posed to Woolworths on Monday were deferred until Tuesday, but Bardwell then appeared no more across the detail than the day before. Pointing to a Woolworths document of commercial and general trading terms, Sharp asked Bardwell if such terms applied to any Woolworths supplier.

“I’m not specifically across this level of detail,” Bardwell replied. The inquiry heard this response from her several times, since – as she pointed out – she has been in the job for only a few months.

Woolworths boss Amanda Bardwell at the ACCC hearing.Credit: AFR

“Woolworths was given a list of topics that may be addressed for this hearing, wasn’t it? And one of those broad topics was supply chain?” Sharp asked.

Bardwell responded in the affirmative. “And one of them was processes for negotiations with suppliers?” Yes. “So I take it Woolworths will be able to answer questions about those processes today?”

“We’re able to provide a high level of clarification, but when we’re talking about specific, detailed contract documents and the like, as we’ve shared earlier, we’re probably not equipped to be able to help with those very specific questions,” Bardwell said.

Sharp then asked if Bardwell had familiarised herself with issues raised by the Australian Food and Grocery Council and by suppliers. Bardwell said she was “certainly aware of them broadly” but was not looking to give “specific guidance” for matters she was “not specifically involved in”.

In many instances, the inquiry heard that category managers were responsible for negotiations with suppliers and that senior executives didn’t have the level of detail being sought.

No land banking and no ‘supplier holidays’

The two main supermarkets denied engaging in land banking, or the purchasing of land to block competitors from setting up shop.

It’s something IGA operator Metcash has accused them of, with Metcash Food chief executive Grant Ramage saying large independent stores were acquisition targets of the majors in what he called a “decapitation strategy”.

“They typically aren’t interested in buying small independents, they would pick off the larger independents, the very successful stores that contribute disproportionately high volume to the total independent network’s volume,” Ramage said last week.

“Taking the big stores at the top away has a disproportionate effect on our network.”

When Woolworths’ property boss Ralph Kemmler was asked if property classified in internal documents as “sites held for strategic reasons” was for land banking, he said: “I don’t think so” in an answer labelled by Sharp as a “strange explanation”.

Weckert was also asked about the topic. “During my time at Coles … I have not seen us engage in land banking behaviour,” she said. “As a company with a finite balance sheet that we’re trying to use the best we can, I want to be investing into properties that are going to deliver us a return.”

Both bosses also denied the practice of effectively punishing suppliers if they didn’t accept certain prices offered by the supermarket by putting them on “holidays” and not ordering from them in following weeks.

“This is not something that should be happening at Woolworths,” Banducci said, adding that there were protocols to ensure it didn’t happen. “That behaviour wouldn’t be appropriate and [I’m] not aware of it specifically happening.”

Meanwhile, Coles chief commercial officer Anna Croft said “supplier holidays” was not a term she’d heard used in the business. “If we had an instance where a supplier was out for a number of weeks, that would be escalated up in our business because that would be a risk to us delivering the commitments.”

‘Overstep the mark’: ACCC top brass interject

Most of the inquiry was steered with a steady hand by Sharp, who has been engaged previously by government bodies to assist with such hearings as the NSW inquiry into Star Entertainment.

But, occasionally, senior ACCC figures piped up to tease out answers on pointier topics. During Woolworths’ session, ACCC chair Gina Cass-Gottlieb and deputy chairs Mick Keogh and Catriona Lowe all jumped in to ask questions about responsibility for rebates and allowances as part of supplier negotiations.

“In many instances, those suppliers would be quite vulnerable in terms of the dependence of their business on continued access to Woolworths,” Keogh said. “Wouldn’t that raise concerns that a category manager … would overstep the mark and extract unfair terms or impose unfair conditions on suppliers as part of those negotiations?”

Shortly after, Cass-Gottlieb added: “What we’re trying to understand is senior manager responsibility in relation to the overall level of rebates and allowances paid by suppliers. How much detail would senior managers become aware of the way in which that’s implemented?”

On Friday, Keogh also interrupted occasionally to prompt executives to stop skirting around questions put to them by Sharp.

“You didn’t answer the question about whether it is a legally binding contractual obligation on Coles,” he told Coles’ Anna Croft on Friday concerning volume forecasts provided to suppliers.

“It is an obligation on the witness to answer questions.”

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